samchain/econo-pairs-v1 huggingface dataset:
Mr. Erçel reports on medium and long-term prospects for the Central Bank of the Republic of Turkey Address by the Governor of the Central Bank of the Republic of Turkey, Mr. Gazi Erçel, before the 66th Shareholders’ General Meeting, in Ankara, on 28/4/98. A detailed account of economic developments during 1997 is given in our annual report for that year which has already been delivered to you. We are keeping the public informed of our expectations for this year through the quarterly announcements of our monetary programme. Today, instead of repeating these short-term perspectives, I would like to speak of the medium and long-term prospects of the Central Bank. For the last two years, my discourse has touched on what kind of institution an ideal central bank should be. Today, I want to consider this matter in a more detailed way. In recent years, there has been a worldwide trend towards simplification of the goals of central banking. This has led to a reduction of the responsibilities they take on. Funding their governments, for example, is no longer the main purpose of central banks. There is none among the western central banks that aims at achieving full employment of the highest level of production. Today’s modern central banks have only one aim: to maintain price stability.

These conditions are currently met in a number of euro area countries, especially Germany. Page 3 sur 7 Allow me to add a paradox that is not sufficiently well known: to get out of the current low rate environment, we should not turn instinctively solely to monetary policy – as many do. In advanced economies, the natural rate of interest – the level that equates savings with investment over the long run – has fallen by around 2 percentage points in the last 20 years, and monetary policy has a very limited impact on this rate. Instead, what we need is to change the underlying economic factors driving the decline in the natural interest rate. Changing these factors means spending on investment and on the future, including on training and education, the energy transition and of course new technologies, with the aim of lifting long-term economic growth. If we want higher interest rates in the future, we must not be afraid to rapidly put in place targeted fiscal and structural policies. This brings us to the third cliché: other countries have gained more from the euro than we have. Unfortunately, this cliché is repeated everywhere, including in Germany.ii It is also paradoxical given that support for the single currency is currently at an all-time high in the euro area – 76% of European citizens support the euro, and the figure is even 81% for Germany. In reality, the euro has benefited all countries, including – and especially – Germany.
In the process, national incumbents are being challenged by a combination of ambitious foreign incumbents eager to exploit economies of scale and nimble, unencumbered new entrants sometimes specialising in niche products. A process that is likely to lead in time to greater consolidation at international level is currently manifesting itself in terms of fragmentation at the national level as local incumbents are challenged. 36 The end-game may well be lower transaction costs at both the trade and post-trade level and more concentrated (if not monopoly) cross-border infrastructure in each. But it may take some time to reach a new equilibrium. Central banks and regulators need not only to prepare for and perhaps help shape the end-game, but also address challenges arising during the transition. BIS Review 130/2007  5  5. 37 (i)  Issues and challenges for central banks and regulators going forward Two key challenges, in particular, will need to be met: Preserve enough influence to protect the collective interest while maintaining a level regulatory playing field  38 The resilience and efficiency of the core infrastructure is an important public good and, given the tendency to monopoly, the authorities need to ensure that they maintain sufficient influence to ensure resilience in this increasingly complex landscape. That requires consistent and objective criteria to be applied to new as well as established systems.

The current outsourcing and off-shoring trend would also present opportunities for us. One estimate is that two million jobs would be created in lower-cost locations like India and China over the next 5 years. While we cannot compete with India and China on cost, we can compete for processing activities which are mission critical and of higher value-added. In the past year, major financial institutions have relocated higher-end middle and back-office operations here. These institutions take the view that Singapore’s developed infrastructure, reliability, and skilled manpower make us more suitable for these time-sensitive and mission-critical functions. In the banking sector, we have gone from 7 local banks to 3 over the last 5 years. Singapore banks have grown larger and stronger, and they are continuing to build up their regional footprints. As a regulator, MAS is happy that they have made progress strengthening management teams and building up risk management systems. Last year, one rating agency even ranked Singapore banks as being among the strongest not only in Asia but in the whole world.5 However, by international standards, the three local banking groups are still rather small, despite having made some regional acquisitions and undergone domestic consolidation. The largest of them, DBS Group, ranks only 96th in the world in terms of assets. The banks are also mainly Singapore banks, rather than regional players with strong presence in several countries. Possibilities for domestic growth are limited, other than by further consolidation.
True sovereignty is reflected not in the power of making laws – as a legal definition would have it – but in the ability to control outcomes and respond to the fundamental needs of the people: what John Locke defines as their “peace, safety, and public good”. [3] The ability to make independent decisions does not guarantee countries such control. In other words, independence does not guarantee sovereignty. Countries that are completely shut off from the global economy, to take an extreme but instructive example, are independent but not sovereign in any meaningful sense – often relying on external food aid to feed their people. Yet being connected through globalisation also 1 / 10  BIS central bankers' speeches  increases the vulnerability of individual countries in many ways. They are more exposed to financial spillovers and to the aggressive trade policies of foreign states, while increased competition makes it harder for states to coordinate with one another to enforce regulations and set standards so as to achieve their social goals. This restricts their control over domestic economic conditions. In this environment, countries need to work together to exercise sovereignty. And this applies even more within the EU. Cooperation within Europe helps protect states from external pressures, and it helps enable their policy choices. Working together to protect Globalisation has profoundly changed the nature of global production and deepened the ties that exist between countries. Cross-border holdings of financial assets are now around 200% of global GDP, compared with about 70% in 1995.

Amund Holmsen: The theoretical background for macroprudential policy Speech by Mr Amund Holmsen, Executive Director of Norges Bank (Central Bank of Norway), at Norges Bank’s Finance Workshop, Oslo, 9 October 2014. *  *  *  Thanks to Henrik Borchgrevink. This speech does not contain any assessments of the current economic situation or policy-related statements. Songs about financial stability are few and far between. But Odd Nordstoga has written a song about just that, entitled Lykkeliten (Happy Times) 1: “Happiness is a time without debt, and reading the end of a book when in bed”. That financial stability can be so directly associated with a feeling of happiness is an encouraging point of departure for macroprudential policy. Nordstoga has actually turned economic theory upside down. Happiness – or utility as we economists tend to call it – is usually associated with consumption. We can borrow to finance consumption. Credit provides an opportunity to advance consumption in time. In that respect, more credit engenders more happiness – not the opposite. But after the goods have been consumed, the loan still exists. Debt creates risk in the financial system. Nordstoga may then prove to be right. A time without debt may be a happier one. The business of banking is such that it can trigger or amplify an economic downturn. Subsequent to the financial crisis, macroprudential policy has evolved into a supplement to both traditional banking regulation and stabilisation policy.
On the quantity side, since the notions of internal rating systems and the quantification of credit risks remain relatively new to the industry, some banks may have kept the relevant default and loss data only for recent years. Insufficient data consequently becomes an obstacle to the implementation of the IRB Approach by banks, in particular that the data collected so far may not be long enough to cover a complete business cycle. As such, the stability of an IRB system under different economic conditions cannot be meaningfully evaluated. The problem is especially consequential in Asia, as economic fluctuations in the region have tended to be faster and greater in magnitude than those in more mature banking markets. The third challenge banks in Asia may face in adopting the IRB Approach is the paucity of internal resources necessary for rating system development and validation. Many banks have relied, or intend to rely, on external parties such as consulting firms and model vendors. Employing third-party services can be beneficial in respect of areas like professional expertise, knowledge transfer, the utilisation of a more comprehensive data set and assuring independence in the validation process. However, over-reliance on external parties does carry certain risks. One example is that banks may not have the internal expertise to assess the quality of the rating systems delivered by model vendors. And it is not just the banks that face resource issues, it is the supervisors as well.

In common with supervisors in the more developed markets, we face the challenge of limited internal resources and expertise with which to implement the IRB Approach. Moreover, banks and supervisors are often competing between themselves for the relevant expertise. In addition, the support to supervisors in Asia from external parties, such as academia, vendors, consulting firms and rating agencies, is more limited than in the developed markets. Finally, both banks and supervisors face a very steep learning curve in familiarising themselves with  2  BIS Review 120/2007  the basic concepts and techniques on which the IRB Approach relies, and need to become more conversant with these types of risk management technique. A particularly important issue to consider that is highly relevant to today’s event is the standards that bank supervisors will apply in deciding whether or not to approve a bank to use the IRB Approach. To ensure that the capital charges computed by the IRB systems are sufficient for banks to withstand the credit risks they have incurred and to absorb the potential losses resulting from borrower defaults, the estimates of the risk components must be accurate in capturing the relevant aspects of risk. As a consequence, validation of banks’ estimates of the risk components, and the underlying internal rating systems, is crucial to the implementation of the IRB Approach. This is one of the greatest implementation challenges confronting bank supervisors in Asia, where the development and understanding of the IRB Approach by banks is generally still at an early stage.
Thus, EMU is to be seen primarily as one aspect of a larger, political project. Most analyses, however, have tended to concentrate on the union’s pros and cons in an economic context. The advantages that have been cited for the participating countries include lower transaction costs for trading in a common currency, increased transparency and competition in the single market, and low, stable inflation. The lack of an exchange rate as an instrument for stabilisation policy is mentioned as one of the drawbacks. Sweden’s Parliament decided in December 1997 that Sweden would not be joining the monetary union from the start, mainly on account of the lack of public support. The BIS Review 68/1998  -2-  decision was made after a committee of experts had reported on participation’s advantages and drawbacks for Sweden. The commission was basically in favour of Sweden being a member of EMU but was of the opinion that, given the disadvantages considered, Sweden should not participate from the start. The costs in terms of stabilisation policy were assumed to exceed the benefits from economic efficiency. The report’s assessment of political aspects favoured Swedish membership of EMU. The report gave the Riksbank an occasion to present its appraisal of the monetary union. This differed and amounted to a recommendation that Sweden should participate from the start. We considered that the commission had overestimated the costs for stabilisation policy, while the economic and political benefits were likely to be even greater than envisaged in the report.

The members of the Council are jointly responsible for making the ECB a success and establishing price stability in the euro area. In this sense they are all in the same boat and nothing is more likely to capsize the boat that a national preference. That, I believe, will characterise what happens in practice. In any event, a distinct, transparent policy right from the start is vital in order to avoid unnecessary uncertainty that could result in exaggerated movements in exchange rates and interest rates. Other components of economic policy  BIS Review 68/1998  -4-  In the long term it is the construction of monetary policy that determines the rate of inflation. In the shorter run, however, price movements are also influenced by other economic factors. Other components of economic policy - that is, fiscal, labour-market and structural policies - therefore have to be constructed so that they support the policy drive for sustainable price stability. If these components do not work, the burden on monetary policy becomes additionally heavy. Economic policy apart from monetary policy will continue to be a national matter in the euro area, even though it is the subject of agreements at Community level. Fiscal policy will still be constructed by the national governments, though to some extent its scope is restricted by the Stability and Growth Pact, to which all the EU countries subscribe. This Pact requires each country to conduct a responsible fiscal policy, defined as achieving a general government budgetary balance or surplus over the medium term.
In September 2018, Norges Bank raised the policy rate for the first time in over seven years. The rate was raised further in March of this year, and is now 1 percent. Gradual interest rate normalisation means that the Norwegian economy is faring well. The rate hikes were signalled well in advance. Norges Bank places substantial emphasis on clear and effective communication of policy rate prospects. Our main channel of communication is the Monetary Policy Report, which contains a thorough assessment of information about developments in the Norwegian economy and the background for the monetary policy decision. In order to reach a broader audience, we communicate through different channels. We give speeches and presentations throughout the country where we address local business leaders, the financial industry or university and college students. In 2018, we launched a new product on our website – Pengepolitikken kort fortalt [Monetary policy in brief].1 This product is aimed in particular at those looking for background on the interest rate decision in a more simplified and relatable version. The message, of course, is the same as in our Monetary Policy Report. Chart: GDP for Norway’s trading partners Let me return to economic developments. Norway’s trading partners have experienced a broad economic upturn in recent years. This has led to a considerable improvement in labour market conditions, and wage growth has gradually begun to rise. In 2018, growth among trading partners slowed somewhat, particularly in Europe. Heightened uncertainty had likely contributed to dampening growth.

Among other things, there was considerable uncertainty surrounding trade tensions between the US and China and the UK’s withdrawal from the EU. Despite somewhat lower growth, unemployment continued to edge down in many countries. US unemployment is now the lowest in 50 years. Consumer price 1/3  BIS central bankers' speeches  inflation among trading partners picked up in 2018, mainly owing to higher energy prices. Underlying inflation was fairly stable among our main trading partners. Chart: International interest rates Official policy rates in the US, UK and Sweden were raised in 2018. The US federal funds rate has been raised in several steps in recent years, and the target range is now 2.25 to 2.5 percent. Nevertheless, the global interest rate level remains low, and market expectations indicate a low level in the years ahead. In the euro area, there are prospects that the ECB deposit facility rate will be negative for some time to come. Chart: Oil prices and the krone exchange rate The tailwind from the rebound in oil prices has provided a considerable boost to the Norwegian economy in recent years. Oil prices have more than doubled since the low in early 2016. In 2018, oil prices were highly volatile in periods, primarily reflecting supply-side conditions. Towards the end of 2018, uncertainty about global economic prospects had a dampening impact on oil prices. After rising to above USD 85 per barrel through autumn, oil prices fell to below USD 55 per barrel at year-end. Prices have edged up again since then.
The situation came to a head in several euro area countries, initially in Greece, which had allowed deficits to creep up during the growth period. In the next round, Ireland and Portugal also came under pressure. They have had to rely on loans from the EU and the IMF with attendant economic programmes to stabilise and then reduce government debt. Government  BIS central bankers’ speeches  3  bond yields in these countries have continued to rise. Particularly with regard to Greece, there is renewed focus on the capacity to manage large fiscal deficits and rising government debt. Norway differs substantially from countries with high public debt. With ample state coffers, the Norwegian economy was to a considerable extent insulated from the effects of the financial crisis in 2008 and 2009. Norway has had room for manoeuvre because solid government finances secure credibility and because inflation expectations are firmly anchored. The oil fund mechanism curbs the effects of oil price fluctuations on the economy. The Norwegian economy has enjoyed the benefits of a disciplined fiscal policy. The fiscal rule has functioned effectively. Chart: Household debt There is one area in which Norway differs from other countries in a manner we perhaps do not like: Norwegian households are among the most heavily indebted in Europe. Household debt growth in Norway has edged down, but the level of debt shows no sign of falling. There is reason to keep a close eye on developments in these areas.

At the same time, over these ten years, we have gained insight into the functioning of the Norwegian economy under an inflation targeting regime. Inflation targeting is flexible, i.e. when setting the key policy rate, weight is also given to stabilising developments in output and employment. For monetary policy to contribute to stabilising developments in output and employment, there must be confidence that the inflation target will be reached. Inflation will not be at target at all times, but if there is confidence in monetary policy, expected inflation will be close to the inflation target over time, which in itself contributes to stabilising inflation. Norges Bank’s communication of monetary policy aims to stabilise inflation expectations by giving the reasons for and explaining interest rate setting. By publishing its interest rate forecasts and monetary policy strategy, Norges Bank has made it easier for others to understand and evaluate monetary policy. It is my objective to continue and enhance the Bank’s analysis and communication. Since March of this year our monetary policy reports have included a summary of the Executive Board’s discussion of monetary policy prior to the reports. Chart: Surplus liquidity in the banking system To be effective, the key policy rate must have an impact on market rates. Norges Bank supplies liquidity to banks to bring short-term money market rates down closer to the key policy rate. Surplus liquidity in the banking system is kept as sight deposits at Norges Bank. The redistribution of interbank liquidity does not function adequately.
Karolina Ekholm: The role of forecasts in monetary policy Speech by Ms Karolina Ekholm, Deputy Governor of the Sveriges Riksbank, held at Handelsbanken, Stockholm, 11 May 2010. *  *  *  The theme I have chosen for today’s speech is the role of forecasts in the monetary policy decision-making process. Given the events in recent days, I realise that many people are probably more curious about how we at the Riksbank view the problems with public finances in southern Europe than about our methods for making and using forecasts. So I shall begin with a few words about this. The EU countries have now decided to implement several measures aimed at preventing the public finance problems in Greece from creating new problems in the financial markets and possibly leading to a new economic downturn. The Riksbank considers it a very positive sign that a large rescue package with measures has now been presented to promote financial stability in Europe. We all gain from safeguarding stability. However, it is still too early to say exactly what effects the new package will have. Here in Sweden the financial markets are functioning, but this does not rule out the possibility that they will suffer contagion effects from the international financial markets. Swedish banks have only small direct exposures towards the so-called PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) and are well-capitalised in an international comparison. However, the Riksbank follows developments closely and has regular contacts with Swedish banks and with other central banks.

The more information we receive on the effects that different risk scenarios have on the economy, the clearer the base for the monetary policy decisions will be. Then it is necessary for decision-makers to realise that it is not always possible to explicitly include all possible scenarios in the forecast. Sometimes this is impossible due to lack of resources. In principle, we Executive Board members have insight and the possibility to discuss the forecasts with the Monetary Policy and Financial Stability Department throughout the whole of the forecasting process. We can then question the assessments made. The Board members’ assessments of which risks are most relevant for the decision naturally also affect which analyses are made by the Monetary Policy Department. The analyses published in Monetary Policy Reports and Updates are normally just one part of those made during a forecasting round. Of course, the entire Executive Board does not always agree with the analyses presented as these are the results of a compromise where the different opinions are weighed together. But in this case it is clear, either from the Board member’s contribution to the debate as published in the minutes, or in the form of a reservation entered. In this way the general public has very good insight into how we Executive Board members have though when making our decision. BIS Review 65/2010  7