samchain/econo-pairs-v1 huggingface dataset:
Pongpen Ruengvirayudh: Thailand’s economic challenges and role of monetary policy Luncheon speech by Ms Pongpen Ruengvirayudh, Deputy Governor of the Bank of Thailand, at the Embassy of the Kingdom of the Netherlands, Bangkok, 1 March 2013. *  *  *  Ladies and Gentlemen, I would like to thank the Netherlands Embassy for inviting me to give a luncheon speech on this occasion. Thailand and the Netherlands have a long-standing cultural and economic relationship, dating back as far as 1605, when the Dutch East India Company set up a trading post in our old capital, Ayutthaya. Today, the Netherlands is Thailand’s third biggest trading partner within Europe, accounting for 12.8 percent of total trade volume between the continent and Thailand. In terms of foreign direct investment, the Netherlands is one of the most prominent European investors, with presence spanning key sectors from banking, chemicals, electronics, to wholesale and retail trade. It is my hope that our two nations will continue to mutually benefit from their strong economic bind for many generations to come. I would like to focus my talk today on the recent economic developments, and the role of monetary policy in addressing some of the present challenges facing the Thai economy. As some of you may already know, monetary policy in Thailand is decided by a committee (MPC) consisting of seven members and four of them are experts from outside the Bank of Thailand. Each of the MPC votes independently to decide on the policy interest rate every six weeks, or so.

This will, in turn, help raise the comfort level and can usefully avoid potential policy missteps and create policy synergies that eventually foster confidence of investors. This is the kind of trust that no amount of legal text, conditions precedent, or covenants can match, but is developed through the friendship and goodwill among friends within the region. Countries in the same region tend to possess better understanding and coordination, and therefore, policies and initiatives at the regional level can be more effective and timely. Second, while the Asian financial crisis was a wake up call for Asia on the need for regional liquidity facility, Asian countries need to consider making such facility sufficiently large and effective with timely disbursement in light of the current global crisis. During the Asian financial crisis, more than 75% of the IMF’s financial package for Thailand came from the funding within the region. The present global situation has also reconfirmed the vision set for the by the Chiang Mai Initiative (CMI) that Asia needs to have its own regional liquidity facility to protect itself from contagion, be it caused within the region or from outside. It is therefore timely that coordination and cooperation among countries be further strengthened to ensure that prompt remedial actions can be put in place in light of the ongoing global financial crisis.
Article 4 (2) of the revised Act specifically states that it shall be one of the objective of the Bank to “ensure the stability of the financial system.”  2  The core principles recommended by the Committee on Payment and Securities Settlement Systems of the Bank for International Settlements (BIS). 2  BIS Review 50/2004  committee dealing with financial stability, the Banking Supervision Committee, and at the EU level the Bank also participates in the Economic and Finance Committee and in its Financial Stability Table. The importance of two-way cooperation with the MFSA The initiatives I have described have strengthened the Bank’s ability to monitor and analyse developments in the financial system in a wider context. It is nevertheless becoming increasingly clear that to carry out this role effectively, the Bank’s efforts in this area need to be supported by the activities of the overall supervisor in the financial field, that is the MFSA. It is, therefore, reassuring to note that good co-operation already exists between the Bank and the Authority. More specifically, the Authority’s focus on the health of individual service providers complements the Bank’s macroprudential analysis of the financial system as a whole and its oversight of the payment and settlement systems. In undertaking their respective tasks, both these institutions have access to information that may not be readily available to the other.

The question we need to ask is how those two characteristics relate to each other. In other words, what is the link between liquidity and risk? Here we could use a very simple framework. Investors have a perception that a market is liquid if they feel they can trade their assets (and positions) with no constraints and without moving prices by too wide a margin. BIS Review 128/2007  1  Liquidity exists when there are counterparties available to trade at any moment in time. It follows that liquidity is both an expression and a consequence of the ability of market participants to take risks on each other. For liquidity to exist, therefore, there must be a general sense, in the market, that each participant (or, at least, most of them) are suitably equipped to face the risks they are taking. This is what we call confidence. Looking at discussions on the current phase of market turmoil, two views have emerged as to what determines confidence. The first view emphasizes information and transparency. Crisis of confidence and drying up of liquidity occur when there is too much opacity in the system, when investors are unable to assess risks, or when market participants do not trust whatever information is available. One good example is valuation. Valuation of complex instruments is currently at the forefront of discussions between regulators, market participants and investors.
Sources: The Riksbank, Ministry of Finance, National Institute for Economic Research and Statistics Sweden  As the figure shows, assessments of the level of equilibrium unemployment for the last four years (2008–2011) are relatively similar. The Ministry of Finance assumes that equilibrium unemployment will decrease strongly in the years ahead. The difference in the assessments is primarily because the National Institute of Economic Research and the Riksbank do not expect the economic policy to have such large effects on equilibrium unemployment. Good guidance for monetary policy? So serious attempts at calculating equilibrium unemployment have been made, but these have concluded in different assessments. Nevertheless, it is important that we try to gain an idea of equilibrium unemployment. Not least is this important in a time when reforms have been adopted that should (as most analysts agree) lead equilibrium unemployment to decrease. But I am extremely doubtful as to whether measures of equilibrium unemployment should be given too prominent a role in practical monetary policy. It seems simple in theory; but, in practice, it is not. Even if we could be more certain of the level of equilibrium unemployment further ahead, this would not give us such strong guidance for monetary policy decisions in the here and now. This can be illustrated by the following diagram.

Barbro Wickman-Parak: Monetary policy and unemployment – a constantly topical debate Speech by Ms Barbro Wickman-Parak, Deputy Governor of the Sveriges Riksbank, to the Swedish Trade Union Confederation (LO), Stockholm, 24 January 2012. *  *  *  I would like to thank Maria Sjödin and Magnus Wiberg, at the Monetary Policy Department of the Riksbank, for their help with writing this speech. High unemployment implies the failure of the welfare state. In Sweden, unemployment increased strongly in conjunction with the crisis of the 1990s, following which it has never fallen below 6 per cent. In this situation, it is important to use every means to improve conditions on the labour market and also to debate the role that could be played by monetary policy in the fight against unemployment. But it is equally important that this debate is realistic. From time to time, we have to remind ourselves that the possibilities monetary policy has in this area have their limits. This is primarily a matter of influencing the more short-term area of unemployment, which depends on economic activity, via effects on total demand in the economy. The area of unemployment that also exists in balanced economic cycles is harder to deal with. This unemployment is usually called long-term unemployment or equilibrium unemployment. The degree of equilibrium unemployment is highly dependent on how well the labour market is functioning, which is affected by policy areas other than monetary policy.
While the crisis did substantial damage, it has not fundamentally affected Asia’s prodigious economic strengths. But if Asia is to realize its potential, it is critical that authorities attend to the unfinished business that remains while continuing to put in place longer-term measures to promote financial resilience and sustainable growth. Asia is at an important crossroads and there is now a unique  BIS Review 57/2000  6  opportunity to consolidate recent reforms and implement lasting change that will pay dividends for years to come. Korea’s history, both longer-term and more recent, gives me every confidence that your country, assisted ably by the Bank of Korea, will rise to these challenges with skill and vigor, ensuring that the next 50 years will be even more successful than the last. Thank you for your kind invitation and attention. Supported by the miracles of modern technology, I would be happy to take any questions you may have. 7  BIS Review 57/2000

I would like to broaden my personal wishes to three collective wishes: for our country and its economy first; for its smooth financing second; and for financial stability and the soundness of your institutions lastly. 1) 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. France must now transform this modest but real recovery into strong, lasting, job-creating growth. To do this, two conditions must be met in 2016: public reforms must be pursued, and corporate investment must be stepped up. As regards the reforms, France is currently being penalised by excessive debt levels in its public sector (differential of 25% of GDP vis-à-vis Germany, whereas both countries displayed the same level in 2010) and the deterioration in its trade balance and competitiveness. The fight for growth and against unemployment can only be won over time, with the great virtue of steadfastness. We must therefore keep up all efforts with regard to containing government expenditure and hold firm on that which is starting to work: the Responsibility and Solidarity Pact and the Tax Credit for encouraging Competitiveness and Jobs (CICE) should enable us to catch up, between 2014 and 2017, one-third of our competitiveness lag with Germany which built up over the first years of the euro (1999– 2007). Transforming the CICE into a permanent reduction in social contributions for corporations would be a very welcome development.
Deep social and demographic changes have altered household behavior in terms of work, saving and consumption, while technological development, the densification of value chains and changes in consumer preferences broaden the range of firms’ choices about how and for whom to produce. All this will force the Central Bank to multiply its efforts to generate new data and analyses, to better understand the international transmission mechanisms, the financial behavior of households, the sources of systemic risks in the banking industry and the operation of key markets, such as those for financial derivatives and mortgages, among others. A better understanding of expectations-building mechanisms and the bases of consumer and business confidence can also help the Bank fine-tune the mechanisms to communicate its policy decisions so that it can provide reliable guidance to the markets. But the need for greater transparency does not end in monetary and financial policy, because the Central Bank, being a public institution, must be able to adapt its standards of transparency to the changing needs of markets and to the demands of Chilean citizens. It must also be able to identify and prevent new perils threatening the performance of its various functions. At this point, it is particularly important to ensure the continuity of the payment systems and operations whereby monetary policy takes place, because of the great technological developments in this area and the high costs of any failure.

We aim to address that through the actions of the MPC and the FPC. The first aims to balance supply and demand and so steer the economy to keep control of inflation. The second aims to preserve financial stability by ensuring the underlying financial system is resilient by identifying risks and taking action to prevent them crystallising. The stress test of the major UK banks towards the end of the year will assess the resilience of the system to a major crash. The steps taken last week are insurance against the possibility of a sustained boom in the housing market leading a substantial increase and concentration in household debt that could make a crash more likely and more severe. And finally, just in case despite this speech, I am deluged with requests to visit the Bank’s gold vaults, I am afraid there are very good security and safety reasons why we cannot offer this. But I can recommend that on your next trip to London you visit the outstanding Bank of England museum just off Threadneedle Street. It is free. And you will be able to try to pick up one of our two bars of gold. Most important of all, there is an excellent game that will allow you to try your hand at maintaining monetary and financial stability. Because stability is what the Bank of England is for. 6  BIS central bankers’ speeches
Moreover, the shape of the underwater part can be difficult to judge by looking at the section which is visible above the surface. This is in my view a useful metaphor, because as the crisis gradually unfolded, a chain of unexpected problems came to the surface and vulnerabilities that were previously underestimated became apparent. Let us consider first the tip of the iceberg, namely the liquidity crisis. Tensions in money markets erupted in August 2007 when the US mortgage market, which was at the epicentre of a complex network of financial derivative products held globally, started to un-ravel. Liquidity in interbank markets worldwide dried up as market participants became paralysed by uncertainty. The key problem was that counterparty risk – which had hitherto remained  BIS central bankers’ speeches  1  limited – suddenly increased in great proportions because the distribution of risk exposures to US subprime mortgage markets was markedly opaque. This led some market segments to partially freeze and others to close completely. This is where the second layer of the iceberg comes onto the stage. The collapse of Lehman Brothers in the autumn of 2008 triggered an exceptionally abrupt re-pricing of risks globally. It led to a very significant intensification of the financial crisis; to a temporary freeze in trade financing and a global trade decline; to a curtailment of credit and domestic demand; and, ultimately, to a severe decline in global demand and output.

Ingimundur Friðriksson: The Icelandic economy and financial system in April 2008 Presentation by Mr Ingimundur Friðriksson, Governor of the Central Bank of Iceland, at a meeting of the Board of Directors of the Norwegian Financial Supervisor, Kredittilsynet, Reykjavík, 24 April 2008. *  *  *  It is a great pleasure for me to have been invited to speak to the Board of Directors and management of the Norwegian Financial Supervisory Authority at its meeting in Reykjavík this week. There are good reasons for the Norwegian Supervisor to come into direct contact with both colleagues in the Icelandic Supervisory Authority and with leaders of financial institutions in general. Much has been written and said about the Icelandic economy and financial system of late, some of it accurate, some of it not so accurate. For the outsider, it may be difficult to separate the accurate from the inaccurate. As requested, I will in my presentation give an overview of recent economic developments and prospects and then touch briefly on the Icelandic financial system. Economic developments and prospects As you know, Iceland is one of the highest income countries of the world and one with a highly developed infrastructure and institutional framework. You may also know that Iceland is prone to greater economic fluctuations than most or all highly developed economies. In the 1990’s, the Icelandic economy was deregulated and liberalised and that process was largely completed with the full privatisation of the Icelandic commercial banks shortly after the turn of the century.
This is why we continue to invest a large amount of our time engaging with our counterparts in Europe as well as with the European Supervisory Authorities, the ESAs. We liaise closely with EIOPA, the European Insurance and Occupational Pensions Authority. Julian Adams sits on the EIOPA Board of Supervisors and Management Board and this gives us an opportunity to participate at a European level. A few weeks ago, EIOPA reported on the critical issue of the long-term guarantees assessment and closed its consultation on proposals for preparatory guidelines. We now have acceptance that the classic matching adjustment is a prudent measure, which is hugely important for the UK life insurance industry. We know that many of you still have concerns around the restrictions built into the classic matching adjustment, particularly around the assets that can be used and the effect of possible downgrades in portfolios which are held for the long-term. We will continue to push for a prudent solution that will meet the needs of UK insurers and allows for the continued provision of annuities to policyholders. In doing so, we recognise that some restrictions are needed for the classic matching adjustment to be an effective and prudent measure. The importance of the EIOPA recommendations and their acceptance by the European Commission should not be underestimated. We have come a long way from the suggestion last year that a matching adjustment would not be part of the directive at all.

There is therefore a common feature of banking and insurance in terms of continuity of access to critical financial services. The PRA has the general objective of ensuring the safety and soundness of the firms under its regulation. Safety and soundness is defined in terms of the resilience of the financial system, which in itself is closely linked to the access of users to critical financial services on a continuous basis. But for insurance we have a second objective, namely the protection of policyholders. Why do we have a second objective for insurance? For me, the reason is that continuity of insurance protection – of risk transfer and long-term savings products – requires a greater assurance that the policyholder has access to their contract – in other words, it is quite contract specific, and in some cases those contracts are long-term in nature. For banks, depositors want continuity of access to funds, but they have less need of access to the exact contract – deposits can be moved. Put another way, most of the underlying risks to banks arise from their assets, whereas for insurers they arise from liabilities and assets. So, we need somewhat different objectives for prudential supervision. The traditional model of supervision has been quite industry specific. The FSA regime introduced in 1997 created a single authority, but within the FSA the framework of rules  BIS central bankers’ speeches  1  applied to insurance supervision was unique to the industry.
15  Jefferson was elected president in 1800, but did not appoint Gallatin until 1801 – even though it had been his intention from the start. See for example Wright and Cowen, op.cit., p. 93, for details. BIS Review 106/2008  3  priorities included a change in Hamilton’s tax structure in order to better reflect the Republican Party’s ideology and its constituencies. He also focused on the need to increase transparency in fiscal policy. He progressed rapidly on both fronts. Internal taxes were soon abolished. The federal government came to rely almost exclusively on import tariffs, which Gallatin saw as luxury taxes that did not burden his farming constituency. 16 Gallatin also convinced Congress to pass the law of 1801, which required an annual report by the Secretary of the Treasury to the President. He submitted the first of these reports later that year. Moreover, the minting of dollars was somewhat scaled back under Gallatin. To compensate, he allowed foreign coins to circulate along with the dollar. These measures were not taken because Gallatin was opposed to the Mint. Rather, the Mint proved to be very costly for the federal purse. Therefore, Gallatin saw the reduction of its operations as a way for the government to save money, in line with his primary objective of fiscal consolidation.

For instance, in order to bring the debt-to-GDP ratio back to 60% in 20 years while maintaining a primary deficit in line with the historical evidence, real growth in the euro area would have to be twice its historical value (1.3% on average over 1995-2021), or alternatively the implicit rate on government debt would have to be half the current one (see right-hand side figures in slide 5). Although simplistic, these exercises illustrate the significant 4  effort needed for the transition to the medium-term fiscal targets, and, indirectly, how it would limit fiscal policy’s capacity as a stabiliser for the duration of the adjustment process. These are just some of the arguments behind the broad consensus on the need to reform the fiscal governance framework in the European Union. However, while everyone appears to agree that reform is needed, views differ on the necessary steps forward and their sequencing. I personally believe we need a coordinated effort aimed at reinforcing the euro area and making it more resilient to shocks. And, in my view, this would involve reforming several areas of economic governance: fiscal and structural policies, the banking sector and capital markets. Allow me to offer a number of reflections on the desirable elements of such a reform, with a view to improving the operation of the policy mix in the euro area.