samchain/econo-pairs-v1 huggingface dataset:
Mr McDonough comments on the implications for the strong US growth for the world economy  Speech by Mr William J McDonough, President of the Federal Reserve Bank of New York, before the Japan Center for Economic Research, Tokyo, on 30 March 2000. *  *  *  Good afternoon, ladies and gentlemen. It is a great pleasure to be invited to speak before such a distinguished audience. My thanks to the Japan Center for Economic Research for extending such a kind invitation. This afternoon I would like to share with you some of my thoughts on the US and the world economies as we move forward into the 21st century. To do so, it is helpful to step back and take a somewhat longer-term view of how the stage was set for much of the current strong economic performance the US economy has enjoyed in recent years. In addition, I would like to comment on the implications of the strong US growth for the world economy. The United States is now experiencing the longest economic expansion in its history. This expansion, which began in April 1991, not only has reached record length, but also has done so in a far stronger manner than had been expected. Most notably, inflation has been subdued, notwithstanding the most favorable labor markets that the United States has experienced in a generation, and the country’s fiscal accounts are in surplus. There is no question that this expansion reflects some remarkable changes in the US economy.

Among the emerging market countries, those in Asia in particular have long been considered engines of vitality and technological adaptation in the world economy, and this recognition had been reflected in very high rates of GDP growth until the financial crises of 1997 and 1998. One problem those crises revealed is that in many countries, economic resources, notably capital inflows, had been misallocated. In the Asian countries, financial market and corporate sector reforms are widely viewed as necessary. It is encouraging to see that some progress has been made on financial restructuring, although the extent to which markets - as opposed to governments - have been the main shaper of change differs across countries. Other reforms appear to be less far along, and the greatest risk is that the sharp recovery so many of these countries have enjoyed will reduce the impetus to undertake and follow through on needed reforms. When we turn to Latin America, we observe an example of how important internal labor market and corporate sector reforms are. In the 1980s and early 1990s, many countries in this region made enormous strides in achieving sounder fiscal and monetary policies, especially in bringing down inflation and strengthening reliance on market mechanisms. However, in several countries, internal reforms were incomplete, with banking systems left in need of further strengthening, labor markets still remaining too rigid, and fiscal policies requiring more attention, starting with the need to ensure that all public sector spending be brought under control.
It could usefully play a role in following up on the IMF’s financial sector assessment programmes, not perhaps in individual countries, but by drawing general conclusions about the strengths and weaknesses revealed by those assessments in the round, and about the overall effectiveness of national follow-up. There are signs that the Forum’s membership is beginning to favour a more proactive approach, but progress is slow. But that recommendation does rather beg the question of what these weaknesses are, which brings me to my third point. (iii)  Plugging the gaps  I believe we can identify some gaps in our defences against financial instability, which could be plugged, if the will were there. There is not time today for a comprehensive overview, so let me just identify a small number of issues which I believe do need to be resolved. One important lacuna is the absence of a global regulatory regime for reinsurance companies. In some countries, as in the UK, reinsurance firms are directly regulated. In others, they are regulated only indirectly, through insurers. In yet other countries they are not subject to any meaningful regulatory regime at all. It may be argued that we have lived with this uneven coverage for some time. But there is evidence to suggest that reinsurers have been taking on more credit risk than before, often transferred out of the banking system through derivatives such as credit default swaps.

Such targeting requires co-ordination between donors and must be in response to the real needs of a country. To this end we see it as imperative that there is effective follow up to the IMF’s FSAP missions to channel technical assistance to where it is most needed. It is also important for individual regulators in developed markets to contribute to capacity development elsewhere. The growing interconnectedness of the financial system means it is in our interests to do so. Sometimes bilateral links can be valuable, especially where the legal and regulatory systems are similar, in former colonies or territories perhaps. At the FSA we have a practice of receiving secondments from other regulators, which is valuable for us, and we hope for them. Perhaps more relevant for Singapore is ensuring that Emerging Markets’ concerns and experiences are heard. A thousand different voices can be lost in the clamour so it is important that objections are  6  BIS Review 25/2003  raised in an organised way, for example through regional organisations. Then the international committees themselves must ensure their consultation processes are meaningful and wide-ranging. Though this combination of adjusting committee structures, and membership, enhancing technical assistance and encouraging effective consultation we can ensure that regulatory standards are truly global and fit for purpose in countries at all stages of financial market development. Conclusion So to return, finally, to my introductory question – is the global regulatory system fit for purpose in the 21st century?
As before, the Riksbank will be publishing an inflation report four times a year, with a more comprehensive survey of inflationary pressure in the Swedish economy in the coming 24 months. 1  BIS Review 18/1999  The Executive Board held its first monetary policy meeting last Thursday and discussed inflation prospects. The Board then decided to lower the repo rate 0.25 percentage point and also lowered the corridor in which the repo rate lies by 0.5 percentage point. The Board’s decisions and the arguments behind them were published in a communiqué on Friday. Another feature of the new Riksbank organisation is that each member of the Executive Board has an individual mandate and one vote. All the members are in a position to make speeches and give interviews on monetary policy in which they express their own view of the situation. It follows that the members can hold different opinions and may also express themselves somewhat differently about joint positions. Today I shall base my remarks on the picture that was used for last week’s Executive Board discussion and summarised in the communiqué. When I elaborate on the communiqué it is my personal opinion I am expressing, though that does not mean that other Board members were not of broadly the same mind. Poorer international prospects In the course of last year, international economic prospects became a good deal worse.

Mr Heikensten looks at the current economic situation in Sweden Speech by the First Deputy Governor of Sveriges Riksbank, the Swedish central bank, Mr Lars Heikensten, to Forum ’99, the Swedish Federation of Rental Property Owners, in Stockholm on 15/02/99. I should like to begin with a word of thanks for the invitation to talk here today about economic developments, inflation and the interest rate. Before taking a look at the current economic situation and saying something about our deliberations in the Riksbank, however, I feel there may be grounds for adopting a somewhat broader perspective and even for striking a slightly optimistic note. Sweden certainly has economic problems; further measures are needed, not least to improve the conditions for growth. But at times it may also be fitting to recall the things that have turned out well. Swedish economic policy was realigned in the early 1990s with the aim of establishing a regime of low inflation. Previously, Sweden had had a long tradition in this respect but in the 1970s and 80s the accepted truths were discarded, including the idea that low inflation provides a good foundation for growth and employment. Following the collapse of the Bretton Woods system, stabilisation policy no longer offered any hard and fast rules. Sweden’s external debt – both government debt and the total stock – was allowed to grow at a dramatic rate, accompanied by spiralling prices and wages. Today, Sweden is in the sixth successive year of good economic growth.
This reflects that cash is a costly alternative to electronic money for participants in these markets. Chart: IBOR rates in countries with negative policy rates The pass-through to ordinary bank rates is slower. Households and small enterprises can at relatively moderate cost avoid negative deposit rates by withdrawing cash. If banks offer these groups of customers below-zero deposit rates, the banks risk losing an important part of their funding. If deposit rates do not follow policy rates into negative territory, the pass-through to banks’ funding costs will gradually weaken, which will in turn dampen or eliminate the decrease in banks’ lending rates.4 In order to strengthen the pass-through to long-term market rates, a number of central banks have elected to provide clearer signals about future policy rates, known as forward guidance, in a situation where policy rates are approaching a lower bound and the economic recovery is still sluggish. Some central banks have linked their signals about future policy rates to specific economic indicators or a specific horizon. In Norway, signals about future policy rates have long been part of the ordinary conduct of monetary policy. Since 2005, our monetary policy reports have included the Bank’s own forecasts for the policy rate three to four years ahead. The policy rate path is the Bank’s best estimate and not a promise. We have had positive experience with this instrument. Asset purchases Over the past decade, a number of central banks have also begun to use a new instrument of monetary policy: the central bank balance sheet.

In order to clarify our deliberations in the assessment of future inflation, the Riksbank presents an inflation report four times a year. A number of indicators are reviewed in these reports, together with an assessment of future tendencies and a discussion of risks and opportunities in the field of inflation. Simplifying somewhat, an inflation forecast can be said to rest on two factors in particular: one is the relationship between supply and demand and the other is expected inflation. The difference between the actual level of demand and the potential level of production that can be combined with an unchanged rate of inflation is commonly referred to as the output gap. As BIS Review 8/1997  -3-  this gap is a notional variable, it is difficult to calculate exactly. We therefore use a variety of indicators to check for consistency of the assessments. The inflation target is symmetrical; that is, preventing inflation from falling below the target is as important for the Riksbank as stopping it from rising above the target. Over time, the economy will then expand at its potential rate. The inflation targeting approach accordingly has a built-in control mechanism. If the monetary stance is unduly tight, bringing economic activity below the potential level, inflation will decrease and sooner or later fall short of the target; and vice versa. This calls for a calibration of the output gap, a new inflation forecast and an adjustment of monetary policy.
Gallatin also kept Hamilton’s system for keeping the public debt more or less intact. Other parts of Hamilton’s financial system were modified to serve Republican causes. Gallatin’s early  10  See, for example, Chernov’s description of Hamilton’s achievements while Secretary of the Treasury (Chernov, op.cit., ch. 17-20). 11  Using the Bank of the United States for the maintenance of financial stability was done both through lendingof-last-resort type operations and through the restriction and extension of credit in response to market conditions. Robert E Wright and David J. Cowen, Financial Founding Fathers: The Men Who Made America Rich (Univ. of Chicago Press, Chicago IL, 2006), ch. 1, provide a thorough exposition of Hamilton’s ideology, achievements, and financial system, as well as his skilled use of the Bank of the United States for the purposes of maintaining financial stability. 12  At the end of 1793, Gallatin won the election to the United States Senate, but was removed shortly thereafter from the Senate on the grounds that he did not have the minimum nine years of United States citizenship. 13  Alexander Balinky, Albert Gallatin: Fiscal Theories and Policies (Rudgers Univ. Press, New Jersey NJ, 1958) gives a very thorough introduction to the fiscal ideology of the Republican Party and how Gallatin’s fiscal theories and policies were shaped by this. Wright and Cowen, op.cit., p. 103, point out how Gallatin had more of a problem with the Federalist domination of Hamilton’s bank than with the bank itself. 14  Quoted in Chernov, op.cit., p. 469.

One possible answer, of course, is that when Thomas Jefferson became President in 1801, he quickly realized that the economic consequences of dismantling Hamilton’s financial structure would be dramatic for his presidency, his party and the country. Moreover, there is evidence that Jefferson may have indirectly given a commitment to the Federalists to preserve at least part of the Hamiltonian financial system in order to break the political deadlock during the Presidential election. What is perhaps most remarkable, however, is that Gallatin seems to have come to appreciate the genius of Hamilton’s system and advised Jefferson accordingly. In an attempt to firmly discredit Hamilton, Jefferson – shortly after becoming President – asked Gallatin to examine the archives and uncover the “blunders and frauds of Hamilton”. After searching “with a very good appetite”, Gallatin went back to Jefferson with the following remarkable assessment: “I have found the most perfect system ever formed. Any change that should be made in it would injure it. Hamilton made no blunders, committed no frauds. He did nothing wrong.” Indeed Gallatin went on to say that Hamilton had done such an outstanding job as the first Secretary of the Treasury that he had turned the post into a sinecure for all future occupants. As for the Bank of the United States, Gallatin proclaimed that “it had been wisely and skillfully managed”. 28 4. What can we learn from Gallatin’s financial achievements today? What lessons can we draw today from Gallatin’s economic policies?
2  BIS Review 103/2009  One important element of the ECB’s actions has been the non-standard measures I have described as “enhanced credit support”. 1 This support collectively defines the special and primarily bank-based measures to enhance the flow of credit over and above what could be achieved through policy interest rate reductions alone, and avoid a systemic liquidity threat. As you know, the ECB’s enhanced credit support comprises five elements: •  the full allotment of banks’ demands for central bank liquidity at fixed rates;  •  the further expansion of the list of assets accepted as collateral in our operations;  •  the lengthening of the maturity of our operations that now go up to one year;  •  the provision of liquidity in foreign currencies, notably US dollars; and  •  finally, direct purchases of covered bank bonds in order to revive this market segment, which is important in Europe. Let me briefly recall the rationale underlying these five specific measures. The first motivation for introducing enhanced credit support was to address the seizing up of the money market. If left unaddressed, this seizing up would have rendered the refinancing of many bank assets impossible, risking a massive and disorderly deleveraging by credit institutions. This, in turn, would have seriously hampered the monetary policy transmission mechanism and ultimately curtailed the expansion of credit to firms and households in the euro area. The core of the measures that we introduced in October was the “fixed-rate fullallotment” tender procedure.

In 2022, inflation rose initially on the back of the rapid surge in prices of import items, in addition to an ever increasingly strong aggregate demand and an overall upswing in costs of production. However, inflation trend recorded a turning point in October 2022, declining progressively onwards at 4.7% in May 2023. This performance reflected the dynamics of prices in global markets, the first effects of our monetary policy's reaction, - which I will elaborate on in more detail below, - and the appreciation of the exchange rate. Also, the relatively low inflation rate in Albania was also backed by the contained electricity prices for households and some businesses, thus transferring the increased cost in energy imports to the public sector's balance sheets. Year 2022 marked progress in terms of improving the external position of Albania as well. More specifically, the Albanian exports grew by 42% over the past year, driven by the rapid growth in tourism income. This growth led to the reduction in both the trade deficit and the current account deficit. In parallel, external debt of Albania declined while its sustainability indicators improved. The improvement in the balance of external trade, the high levels of foreign direct investments coupled with the stability of the domestic financial markets, drove to the strengthening of the lek exchange rate during the past year. These trends seem to have continued in 2023 as well.
By separating the provision of liquidity from exposure to credit risk, credit derivatives, and the related developments in structured finance, give non-banks new ways of accessing credit risk. As well as more dispersed risk buttressing systemic stability, the innovation of credit derivatives has plausibly taken us a further step towards complete markets, in effect providing a richer market for credit insurance than previously existed. Investors and others may, therefore, be able to get a little closer to the portfolios they really want to hold, which would facilitate a better allocation of risk and so bring broader welfare benefits. This works in the direction of reducing the price of risk, which would reduce the risk premium used to discount uncertain future cash flows. There are, therefore, tangible benefits from the new derivative markets for unbundling and transferring credit risk. And the same can be argued for the earlier development of interest-rate, foreign currency and equity derivatives. So where’s the catch? Short-option positions and market dynamics Everyone is familiar with the risk present in markets if ‘everyone’ tries to sell – or buy – at once. Various features of markets can create the conditions for, or reinforce, such herd-like behaviour. Panic in the presence of excess leverage is the familiar culprit, and goes back to well before the invention of derivatives, as various authors have documented in the context of the Great Crash. Derivatives have not altered the firmament in some deep, unrecognisable way. But they have introduced some novel variations on old themes.

Ex ante, they won’t know for sure which is which. Plausibly, it might not be economical to put controls in place for every single innovation on an assumption of ‘exponential growth’. So when exponential growth occurs, controls can sometimes be left behind. Maybe something like that helps to explain the backlog in credit derivative confirmations, which the FSA cautioned banks about a few months ago. Growth in the market has been relentless. And to the concerns about confirmations have been added concerns, amongst practitioners, about unnotified assignments of credit derivative positions, related in part to the growth of hedge fund participation in the structured credit market. If something really bad were to happen, the system would, perhaps, be less robust than otherwise if dealers were not sure about who their counterparties were, etc. This is the type of challenge where collaboration across the industry is needed; and where individual firms’ incentives are stronger if they can each be confident that their peers are taking broadly the same actions. What I have in mind is the disincentive a firm faces in being tough with a hedge fund client if they doubt their peers will take the same line. Bodies such as ISDA have a role to play here, and I understand are doing so. Collective elements in atomistic markets So, where are the risks? They are all around us all of the time, of course. Some will crystallise. But that need not lead to disorder.
4 Put differently, there are around the same number of FTE volunteers in the UK as there are paid employees in the manufacturing, construction and real estate sectors combined. Indeed, the only industrial sectors with a larger UK workforce are wholesale and retail services, education, health and social work. And it does not end there. It is estimated that another 170 million hours a year are volunteered by people less than once a month. 5 And to this estimate of formal volunteering should be added measures of informal volunteering. According to calculations recently released by the ONS, informal volunteers provide anywhere between 1.7 and 2.1 billion hours of extra help each year. 6 So, all in, volunteering in the UK might amount to as much as 4.4 billion hours per year. That is 1.7 hours per week for every UK adult aged over 16. It is not far off 10% of the total hours worked by all UK paid employees. That is quite an army. 4  Bank and Pro Bono Economics calculations using ONS Household Satellite Account hours. 5  Bank and Pro Bono Economics calculations using ONS Household Satellite Account hours. 6  See http://www.ons.gov.uk/ons/about-ons/business-transparency/freedom-of-information/what-can-irequest/published-ad-hoc-data/econ/august-2014/hhsa-consistent-estimates-of-the-value-of-informalvoluntary-activity-in-2012-13.xls for further details. BIS central bankers’ speeches  3  Second, volunteering also appears to be big internationally. A group of academics at John Hopkins University have been pioneers in this field and have published cross-country comparisons. 7 They calculated that, in 2005, around 970m people in the world were engaged in voluntary activity.

In any event it will be fascinating to see what other contracts emerge over the coming months. Of course, not all contracts that are launched will be successful, and it’s interesting to reflect on what makes a successful derivative contract. Lessons can often be learned from looking back to the past. Not far from this location is the home of the London Metal Exchange. Its origins can be traced back to 1571, when traders in metal and a range of other commodities began meeting at the Royal Exchange. What was originally a domestic market in physical metal became a major global market, and by the early 19th century traders had been forced to use nearby coffee shops. As the UK started importing large quantities of metal from abroad during the Industrial Revolution, the need emerged for importers to protect themselves against price movements during the long voyage from places like Chile and Malaysia. The “futures” market which developed from those humble beginnings continued to grow and, in 1877, the London Metal Exchange Company was formed. That market was successful for a number of reasons. Volatility in the price of the underlying product made the contract attractive to hedgers and speculators alike. Technology - the telegraph would you believe! - encouraged the market’s growth by making shipment arrival dates more predictable. The LME had a first mover advantage that still stands. Liquidity flourished as traders followed one another in using the new market.