samchain/econo-pairs-v1 huggingface dataset:
Jean-Pierre Roth: The creation of the euro and the new international monetary order - a view from Switzerland Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the 2nd Conference of the “Geld und Währung” Foundation on Financial Stability and Globalisation, Frankfurt, 3-4 June, 2004. *  1. *  *  Introduction  It is widely acknowledged that the birth of the euro on January 1, 1999 was a milestone in the process of European integration. Giving up national sovereignty in monetary matters was a very bold move of truly historical proportions. It will have long-lasting economic and political consequences. It should promote efficiency, transparency, and growth. The creation of a single currency should also act as catalyst towards further European integration. Moreover, and this is really what I would like to focus on today, the creation of the euro has changed the world’s monetary landscape. I believe that one can say without fear of exaggeration that it has led to a new international monetary order. And for most of it, this is very good news indeed. 2. Our pre-euro fears  To be honest, I must admit that prior to the introduction of the euro we were somewhat worried at the Swiss National Bank. Although we fully appreciated the benefits that Switzerland would draw from the creation of the euro in terms of increased transparency and lower transaction costs, we were also quite concerned about possible risks. We had three main fears.

Central banks, as regulators, can play their own role in this endeavor. At Bank Al-Maghrib, we are continuously working to improve the representation of women in the boards of credit institutions through a gradual approach. For instance, in 2014 we laid down the obligation for such bodies to implement a policy aimed at ensuring a better representation of women. Two years later, this directive was reinforced by making compulsory compliance with the principle of parity in the appointment of independent directors. Our efforts in this regard are still ongoing with a new regulatory recommendation aimed at bringing the banking sector to further move towards the reduction of gender inequalities and a more inclusive finance. This regulatory text, which will be adopted before the end of the year, calls for a genuine implementation of the gender dimension by (i) entrenching professional gender equality within banking institutions; (ii) developing offers adapted to the needs of female customers, in particular female entrepreneurs, based on dedicated refinancing mechanisms such as “Gender Bonds”; and (iii) assisting these institutions in the implementation of funded projects. Furthermore, to catch up with the deficit in accessing financial services, the Ministry of Finance and Bank Al-Maghrib have developed and implemented a national strategy for financial inclusion. This strategy targets as a priority women, youth and the rural population. Ladies and gentlemen, Alongside these efforts as a regulator, Bank Al-Maghrib is striving as an enterprise to set an example in terms of professional equality between men and women.
This evidence suggests the pulse of the Phillips curve has quickened as the labour market has tightened. Unlike over much of the past decade, estimated wage equations are now broadly tracking pay (Chart 5). A year ago, the Bank’s forecasts of average weekly earnings growth into mid-2018 was 2.5%. Wage growth in the year to 2018 Q2 was 2.4%. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  How are these pay developments affecting the monetary policy outlook? Inflation is currently above the Bank’s 2% target. That is entirely due to the effects of past external price shocks, notably sterling’s post-referendum depreciation. As these external effects fade, inflation is projected to be maintained at or slightly above its target by a slow build in domestic cost pressures, underpinned by a rise in wage growth. The rise in wages projected by the Bank is, to coin a phrase, limited and gradual. Private sector pay is assumed to rise from 3% currently to around 3 ¾% three years hence, or around 25 basis points per year. That is below the pace at which wage growth has built over the past few years. Over the same period, unemployment is projected to fall further below its natural rate, though again at a slower pace than over recent years. The path of domestic costs in the economy depends on developments in firms’ productivity, as well as in pay. Weak productivity means even low nominal pay increases can be inflationary.

It’s useful that governments look into that and look at the various tools that could be effective and which could correspond to the various goals that they want to pursue, including making sure that the policies followed by member states receiving EFSF support are aimed at restoring a sound fiscal and the appropriate competitiveness. 2  BIS central bankers’ speeches
I think it is fair to say that the Open University has reached its maturity as an institution under his presidency. Yet, remarkably, the momentum that has characterised the University's early years seems now to be gaining rather than slackening, with the recently announced plans for expanded services not just in Hong Kong but also on the Mainland. Professor Tam will retire with the knowledge that the Open University is in a flourishing condition and has an excellent reputation, internationally as well as locally. I join you all in wishing him health and happiness in his retirement and in wishing his successor, Professor John Leong, every success. The Linked Exchange Rate system I had originally planned to talk generally this evening about challenges in central banking. I shall certainly address this topic later on. But it occurred to me as I was preparing the talk that this week, in addition to launching Alumni Link, we also mark the anniversary of the launch of another Link, which I also participated in twenty years ago. Since that Link has again become quite topical over recent weeks, I thought you might be more interested if the focus of this talk was on the Link. Twenty years ago, almost to the day, the Hong Kong Government announced and then implemented a new policy to stabilise the Hong Kong dollar. This was at a time when the dollar had been falling in value so fast that the monetary and banking systems were in a state of crisis.

In my view, the role is quite straightforward: it is to sustain a monetary and banking environment that is conducive to resolving the economic and fiscal problems that face our community - not just in the public sector, but also in businesses and households. This is not the passive, static role that it may seem, as the maintenance of a rule-based monetary system in the form of the Link misleadingly suggests. Indeed, there is the scope - and often the need - for an active and imaginative use of financial, supervisory, communication and other skills. The degree of openness and the relatively small size of Hong Kong's financial system, against the background of globalisation, mean that the maintenance of monetary and banking stability is a particularly difficult task. There is also the requirement, implicit in the Basic Law, to look ahead, and in particular, to develop the financial infrastructure that will secure Hong Kong's position as an international financial centre and provide it with the means to build on that position. And there are other important tasks, such as seeking to help the Government in its efforts to contain the fiscal deficit by achieving a favourable return on the fiscal reserves deposited with the Exchange Fund - subject always to meeting the other investment objectives of the Fund. All of these tasks present challenges to keep me and my colleagues busy enough. But there have also been suggestions that the HKMA should take further steps to help stimulate growth.
Estimates from regression analysis by BIS show that the sensitivity of investment to investment opportunities (proxied by Tobin’s Q) is approximately three times more sensitive for physical investment than for intangible investment – a result that the BIS suggest could be explained by “the structural lumpiness of intangible investment”. In a similar vein, Ryan and Taylor (2017) also find that intangible capital responds more slowly to changes in investment opportunities. They conclude that, compared with physical capital, intangible capital’s convex adjustment costs are roughly twice as large. 9 See https://www.oecd.org/eco/growth/OECD-2015-The-future-of-productivity-book.pdf. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  Although these secular forces may likely persist, many of the conditions for a revival in business investment are now in place. II. The Contribution of Central Banks to Investment Recognising that the most important contributions will be from structural policies, how can central banks support that belated investment recovery? First, we must acknowledge that, while the cost and availability of finance matters; internal cash flows, the profit outlook and uncertainty are far more important determinants of investment. Monetary policy affects companies’ profits and cash flows through its effects on domestic demand and, via the exchange rate, external demand. Given the importance of internal finance for investment, and the high hurdle rates investment projects must clear, such indirect effects are more important for investment than the direct effects on the cost of capital. The biggest contributions of central banks are therefore improving the demand and profit outlooks and reducing uncertainty.

6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Chart 1: G4 non-residential investment weak since the crisis Percentage changes since 2007 15 United Kingdom  United States  Euro area  Japan  10 5 0 -5 -10 -15  2007  2008  2009  2010  2011  2012  2013  2014  2015  -20 2016  Sources: Eurostat, ONS, OECD and Bank of England calculations. Notes: The data for the UK, the US and Japan are for private non-residential investment; the data for the euro area include public nonresidential investment. Chart 2: Weakest UK business investment in half a century Indices, peak in GDP = 100 160 Range of previous recessions  150 140  2008 Average of previous recessions  130 120 110 100 90 80 70 60  -20  -16  -12  -8  -4 0 4 8 12 16 20 24 Quarters relative to date when GDP peaked  28  32  36  Sources: ONS and Bank calculations. Notes: The chart plots real business investment. The range includes the recessions of 1973, 1979 and 1990. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Chart 3: UK real business investment to GDP ratio is falling Percent of GDP 12 10 8 6 4 2  1997  1999  2001  2003  2005  2007  2009  2011  2013  2015  0 2017  Source: ONS.
The single supervisory mechanism has been defined as an integrated system of surveillance of financial institutions under the clear leadership of the ECB, which in turn benefits from the supervisory experience of the competent national authorities. Specifically, the ECB assumes all the relevant powers in respect of the supervision of credit institutions, and exercises them through decision-making arrangements centralised in a Supervisory Board on which both the ECB and the national supervisory authorities sit. The latter contribute, according to the Regulation, to the preparation and application of the decisions taken in a centralised fashion. The work of the national authorities will be channelled through what are known as the Joint Supervision Teams. These teams, which will regularly monitor each institution, will be made up of supervisory staff from the ECB and from the national authorities. Regular on-site inspections will, as a general rule, be conducted by the national authorities, following centrally set mandates and arrangements. As you can imagine, the work ahead over the coming months will be very intense. Having to assume supervisory powers in scarcely one year will make great demands in terms of organisation. Specifically, several groups made up of staff from the ECB and the national authorities have been set up in Frankfurt and are pushing ahead with the extensive groundwork.

This fragmentation has quite considerable consequences in terms of differences in the borrowing costs for households and firms according to their geographical location, which reflects the deficient functioning of the common monetary policy transmission mechanism and leads to highly destabilising imbalances between countries. This is why the banking union – whose aim is none other than to ensure the disappearance of the country-risk component of banking liabilities – has been seen as essential to ensure the stability of the  BIS central bankers’ speeches  1  monetary union, radically altering the European authorities’ set of priorities. What is today a reasonably well-defined project was but a short time ago a mere concept in the minds only of the most visionary pro-Europeans. Single supervisory mechanism The first step towards creating the banking union is the start-up of a single supervisory mechanism, the Regulation for which has recently been approved. We cannot overstate the importance of this milestone: according to the Regulation, in less than one year the financial system of the euro area countries – and of the other EU countries that should decide to join – will come to be supervised by the single mechanism set up within the European Central Bank. In particular, significant banks – which account for 80% of the sector – will be directly overseen by the new European supervisory authority.
In the past year those promises have become realities with the statutory Financial Policy Committee (FPC) and the Prudential Regulation Authority (PRA) formally joining the Bank. The question now is how we use our powers to fulfil our responsibilities. In response, the Bank of England is today launching a transformative strategic plan to fulfil its broader mission. We have a new leadership team. We are setting out fifteen initiatives to reshape the institution. Behind that plan is a vision for the Bank that I want to set out this evening. It is: A Bank with many and varied responsibilities, but a single timeless mission; An institution that works as One Bank to exploit the synergies and complementarities across our policy functions; A Bank that draws on its long history of intellectual leadership and international engagement to shape an open, resilient global system; And a Bank that builds on the immense successes of the past quarter century in combining clear objectives, good governance and constructive transparency. A single timeless mission Let me begin by asking a simple question: what is the Bank of England for? The Bank’s founding charter of 1694 explains that its original purpose was to “promote the publick Good and Benefit of our People…”. What that meant in practice at the time was  1  “The fight against inflation” was the title of Geoffrey Howe’s 1981 lecture.

The model used for monetary policy of decisions being made by a committee made up of both Bank of England executives and independent experts has been expanded to financial stability with the creation of both a Financial Policy Committee and a Board of Prudential Regulation. As I have argued, those policy committees will be more effective if they have access to the broadest range of the Bank’s analysis and information and are as well informed as possible about each other’s reaction function. The now very wide range of the Bank’s responsibilities also creates a need to strengthen the oversight arrangements for the Bank as a whole. For delivery of our statutory objectives, the Bank is accountable to the public, through Parliament’s Treasury Committee. That accountability is being reinforced. Parliament has created an Oversight Committee of 8 non-executives who are in the Bank but not of the Bank. The Government has today announced the appointment of Anthony Habgood to lead the Bank’s Court of Directors and the Oversight Committee. I welcome the appointment of someone of his depth and breadth of corporate experience. Independent oversight by the committee he will chair can strengthen the Bank’s legitimacy and effectiveness. The Oversight Committee has access to internal papers, is able to observe meetings of policy committees, and is responsible for reviewing all aspects of the conduct of the Executive of the Bank, including the delivery of policy, the design of and adherence to rigorous processes and procedures, and the monitoring of our transparency and openness.
However, if one takes into account the low risk in most hedge funds, the picture is entirely different. For instance, the Swedish hedge fund index shows a much lower volatility than the general index. [Figure 2 and 3]  2  2  The data on Swedish hedge funds is taken from the Swedish Investment Fund Association.

Lars Nyberg: Are hedge funds dangerous? Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at a meeting at Nordea and the CFA Society of Sweden, Stockholm, 24 November 2006. *  *  *  I shall begin by thanking you for the invitation to come here to Nordea and the CFA Society of Sweden to develop some thoughts on the usefulness and risks with hedge funds. After several years of strong growth, hedge funds are a hot topic among market agents and authorities. Although hedge funds’ percentage of the total capital managed is small, around five per cent, they account for a large part of the liquidity on certain markets. Many people express concern as to what effects hedge funds might have on financial stability and after the much-publicised collapse of the US hedge fund Amaranth in the autumn, the debate on regulation has gained new impetus. As you may perhaps know, Amaranth primarily traded various gas and energy derivatives. After summer 2005, Amaranth held gigantic positions in the gas market – they believed in a price increase. Between August and October 2005 the price of natural gas rose by 50 per cent, partly as a result of the severe hurricanes. The fund earned substantial amounts of money and the fund managers were also expecting this autumn to see high energy prices during the winter. They bought futures for November and March and sold (sold short) contracts for October and April. However, this year did not develop as expected.
On the contrary, and since the very construction of the Euro was based on continuity with the most credible national currencies, it was foreseeable that interest rate convergence inside the future Euro area would take place progressively on the basis of a merge of different yield curves of the various currencies with the benchmark yield curve corresponding to the most performing and credible ones, as it effectively happened. The nay votes from France and the Netherlands to ratifying the EU constitution rattled Europeans concerns for the future. Some observers immediately conjectured that the single currency was directly responsible for the muted economic performance of the euro area and publicly questioned its durability; however, the track record of the Single monetary policy, after 8 years of implementation, has been really impressive: the inception of the euro has been so far associated with an increased macroeconomic and price stability within the euro zone, despite an unusual sequence of unfavourable events, adverse supply shocks and periods of global financial turbulences. The extent to which the recent episode of financial distress will affect the global outlook remains an open issue but the Eurosystem has demonstrated its ability to withstand such a shock as well as the effectiveness of its operational framework. The point I would like to set out today is that a high degree of credibility, transparency and predictability of the Eurosystem’s monetary policy is a key condition for its efficiency.

In this light, the Bank of Thailand is keen to collaborate with our regional counterparts to promote payment systems connectivity within the region. The third foundation is the work towards standardized rules and regulations. Given our countries’ diverse financial systems, the harmonization of rules and standards should be given a priority so as to strengthen financial interconnectedness on a sustained basis. In the same way that the airline industry harmonizes the regulation on cross-border supply of services, the finance industry should aim at employing internationally accepted principles on finance, which already exist, to help drive harmonization of rules and regulations. Take the payment systems for instance. Currently, different legacy systems among our countries mean that we are not able to “talk” with each other as seamlessly as we wish. Adhering to the same standards, such as the one on financial messaging schemes, can help overcome this challenge. At this stage, the work to achieve harmonization on diverse aspects of banking businesses is underway, and if completed, will make financial transactions within the region much easier. The fourth factor is human capital development. Financial professionals both working in the finance industry and regulators must be well equipped with a set of skills required to serve people of the region. The fast pace of technological and financial innovation indeed urges us to upgrade our capabilities in order to understand more complex financial activities and to cope with growing risks including those related to cyber security.