samchain/econo-pairs-v1 huggingface dataset:
PLATFORM FOR DISCUSSION  EVENT: BIS Meeting of the Working Party on Monetary Policy in Central and Eastern Europe 2њљњљ DATE:  NATIONAL BANK OF THE REPUBLIC OF NORTH MACEDONIA  20-21 February 2020  info@nbrm.mk  LOCATION: Becici, Montenegro  www.nbrm.mk  MONETARY POLICY CONUNDRUM IN DEVELOPED ECONOMIES – IS THE REGION DIFFERENT? Ana Mitreska, NBRNM Ljupka Georgievska FSBRR1, NBRNM Gani Ramadani MPRD2, NBRNM  1 Financial Stability, Banking Regulations and Resolution Department. 2 Monetary Policy and Research Department. 1  Monetary Policy Conundrum in Developed Economies – is the Region Different? Ten years after the global crisis, it is more than certain that the context for monetary policy making has not returned to the pre – crisis “normal”. Central banks, in advanced economies in particular, have deployed unprecedented measures to ensure proper functioning of financial markets, and to provide impetus to the economy. Despite the recent global recovery, uncertainties remain elevated and possible vulnerabilities come to the fore. At the same time, certain macro-economic linkages on which conventional monetary policy making was based on have been challenged. To streamline the matter, we will tackle few important issues, which as monetary policy makers we have been faced with. First, though the monetary accommodation helped the recovery, easy financing conditions might have encouraged excessive risk-taking and building of debt vulnerabilities. Second, inflation rate has been low for long, despite the wage growth in many countries, giving ground to the so called “wage – price puzzle”, and questioning the traditional Phillips curve concept.

This is achieved through the hard work, dedication and ingenuity of our manufacturers, who have seized the opportunity to exploit the synergy between Hong Kong and the Mainland China by relocating the land- and labour-intensive processes north of Hong Kong while retaining the servicing and supporting base in Hong Kong. 8. Finally, I would like to close by echoing what Mr. C.H. Tung said in Vancouver during the APEC meeting. Hong Kong, given its sound fundamentals, robust monetary and banking systems, huge foreign reserves, flexibility and resilience in coping with external shocks, would be the first economy to rebound after this episode. We should have confidence that, while in the short run the markets may become more volatile or they may overshoot from time to time and there may be pain involved during the adjustment process, economic fundamentals should prevail in the end. We should be confident that, as we have done on so many occasions in the past, we shall be able to overcome this difficult period and emerge as a stronger and more competitive financial and servicing centre in Asia. We have done it before and we can surely do it again. BIS Review 116/1997
8  BIS central bankers’ speeches  while model error cannot. Put differently, with market-based CoCos the cost of Type I errors may be relatively modest for end-investors. A second key practical issue is whether it is plausible to imagine an investor base for CoCos emerging. Recent signs have been encouraging. Two major international banks have issued CoCos totalling around $ since the start of the year. Credit Suisse recently issued a $ CoCo in a public auction, which was reportedly 11-times over-subscribed. Some market commentary suggests the CoCo market could grow to around $ trillion over the next few years.20 Despite that progress, investor demand for CoCos remains uncertain. Tellingly, none of the CoCos issued so far have had market-based triggers, none have a graduated ladder of triggers and, in my view, none extend very far up banks’ capital structure. In short, the case for a CDE capital structure is, at present, unproven. But there may be simple, evolutionary ways to catalyse market demand to achieve this capital structure. Perhaps the simplest way to do so would be to require banks to make discretionary distributions to staff and shareholders in CoCos. In this way, an investor base for CoCos would emerge organically and grow in line with banks’ profits. As well as catalysing the CoCo market, this distributive approach would have two further benefits. First, it would boost the resilience of banks by keeping revenues in the business and augmenting banks’ capital base.

The Riksbank has chosen to publish minutes of Executive Board meetings after an interval of 6–8 weeks; the minutes are to reflect the discussion and indicate how the members voted. The clearly independent status that has now been assigned to the Riksbank has much to do with this choice. The minutes make it easier for policy evaluators to follow the formation of monetary policy and assess the actions of Board members. This is a democratic interest. Moreover, the fact that the voting will be published probably increases the members’ motivation to form a personal opinion about the difficult matters that have to be considered. I also believe that access to the minutes can help people to understand the choices that have to be made in the formulation of monetary policy and demystify what the Riksbank is doing. It is arguments of this type that made my British colleague Mervyn King declare, with reference to the work of the Bank of England’s Monetary Policy Committee, that ‘Divided we stand, united we fall’. I want to emphasise that these matters are by no means simple. It seems to me that a clear analytical framework, combined with a high degree of transparency, has provided a good foundation for Swedish monetary policy in recent years. But with an Executive Board consisting of six members, each of whom is in a position to voice an opinion on monetary policy, it is probable that from time to time the Riksbank will be criticised for being indistinct.
The results show that an increase in the capital to assets ratio by 20% reduces the GDP per capita by 1.6% for the whole sample, and by 2.5% for the emerging markets, while the increase of the liquid reserves to assets ratio by 20% adversely impacts the GDP per capita by 0.4% and 0.5%, respectively. Another research, conducted by the International Institute of Finance (IIF), a private sector institution, in 2011, finds pronounced net cumulative impact on economic activity of the proposed financial sector reforms (both, CAR and LCR) estimating that the level of GDP will be 3.2% lower than it would otherwise be after five years with an output loss of 0.7% per annum. On the other hand, the analysis conveyed by the Macroeconomic Assessment Group (MAG), which was set up by the BCBS and FSB in 2010 with a purpose of assessing the macroeconomic effects of the new Basel III proposals suggests a modest impact on aggregate output of the transition towards higher capital and liquidity standards. According to MAG’s assessment results, a 1 percentage point increase in the target ratio of tangible common equity (TCE) to risk-weighted assets is estimated to lead to a decline in the level of GDP by a maximum of about 0.19% from the baseline path after four and a half years (equivalent to a reduction in the annual growth rate of 0.04 percentage points over this period).

Loss of diversification benefits Another important drawback in this regard is the initiated process of deleverage of western banks, their more pronounced concentration on home markets and the general fragmentation of international banking model that could deplete the financial markets of EE’s, slow down the process of their regional integration and globalization and will eliminate the potential diversification benefits for their investors. Incentive for further development of shadow banking Extremely high capital and other requirements may drive banking activity into institutions or financial arrangements that are not regulated as strongly, often referred to as “shadow banks.” This is especially pronounced in EE’s where required credit growth rates to support continued rapid economic growth and social development are much higher compared to advanced economies (AE) 3. There is near universal agreement after the financial crisis that the shadow banking sector is potentially capable of creating massive problems and triggering a future crisis. Therefore, there is much discussion on how to control those institutions and  3  According to Financial Stability Board’s monitoring report on global shadow banking (“Global Shadow Banking Monitoring Report 2012”, page 4, paragraph 5): “After the crisis (2008–2011), the shadow banking system continued to grow although at a slower pace in seventeen jurisdictions (half of them being emerging markets and developing economies undergoing financial deepening) and contracted in the remaining eight jurisdictions”..  BIS central bankers’ speeches  5  types of transactions.
Then the Federal Reserve would have to slam on the brakes, we’d have a recession, people would be thrown out of work. Not a good situation. So, the idea is to have an economy that moves in a smooth way. And so by taking out a little bit of that accommodation, moving up interest rates just a little bit, we think it’s more likely that we’ll achieve a soft landing and keep the economy about where it is today in terms of employment. So, it’s a delicate adjustment. It’s not something that’s very harsh. We think it’s appropriate and necessary. But I think the economy will be able to adjust to this just fine. Dr. Olajide Oladipo: Thank you. Sometime ago, I think that was 2012, 2013, I took some students to the Federal Reserve Bank. And you do have annual events at the Fed which I attend every year, often in March. A question that came to mind is that the students were very excited when they went to the Federal Reserve Bank. The question I wanted to ask you is what are the skills required to work at the Fed? President Dudley: Well, there’s lots of different parts of the Federal Reserve. There isn’t one particular skill. There’s a lot of economists because we think about how the economy is working and operating and the conduct of monetary policy. There’s a lot of people that work on overseeing banks. Supervision is one of our biggest groups.

My first question is how do we establish a better relationship with your organization in an effort to – we can get this information that you have and its resources on the grassroot level? And my second question is –  President Dudley: All you have to do is give me your card afterwards. Audience Member: Oh, okay. My second question is we’ve done an assessment of the economic state of Southeast Queens, Sen. Sanders’ office, and a majority of our residents here are considered banked and under-banked. My question to you is a lot of ... especially for – we have a huge population of Millennials, we’re looking to purchase homes in our area. A lot of us make under $ and probably have some problems with credit. But my question with the home buyers programs is there a way, or how can we have a conversation about increasing the matching funds because the highest that the rates for the federal home buyers program is 4:1. And we want to talk about how we can get that to 10:1 so it can help, it can match the demographics, economic demographics, of our community, so people can start receiving in tangible resources like purchasing a home with the resources that they have. President Dudley: I’m not an expert in the issue of how much money you need to match. I don’t think I can speak to that directly.
This means that the scope for manoeuvre in monetary policy should be used if the outlook for the economy changes.” In the 1950s and 1960s, a strong belief evolved that the economy could be controlled and steered in the desired direction. This optimistic view gradually lost favour in the face of developments. The way in which economic policy is oriented today reflects the experience gained and the lessons learned in the 1970s and 1980s.3 Economic policy at that time was marked by coordination, control and regulation. Important elements were: •  fiscal policy oriented towards full employment  1  See Jahn, Gunnar, Alf Eriksen and Preben Munthe (1966): Norges Bank gjennom 150 år (A history of Norges Bank). In Norwegian only. Norges Bank’s Printing Works, Oslo. 2  Cf. Report No. 1 (2003-2004) to the Storting, National Budget for 2004. Ministry of Finance, Oslo. 3  Hermod Skånland is in the process of completing “Doktriner og økonomisk politikk” (Doctrines and economic policy), which provides a very interesting discussion of post-war economic policy.

Sveriges Riksbank. Pettersson, Ola and Hållö, Torbjörn (2013), Riksbanken sköter inte sitt uppdrag. [The Riksbank is not doing its job] (only in Swedish) Debate article in Göteborgs-Posten newspaper, 14 August. Srejber, E. (2002), Inflation Targeting and Bubbles. Speech at Adam Smith seminars, Paris, 9 July. Sveriges Riksbank (2012), Creating a Swedish toolkit for macroprudential policy. Riksbank studies November 2012. Sveriges Riksbank (2013), Consultation response to the report Preventing and managing financial crises (SOU 2013:6). Schularick, Moritz and Taylor Alan M. (2012), Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870–2008. NBER Working Paper 15512. Swedish Government Official Reports (2013), Förstärkta kapitaltäckningsregler [Stronger capital adequacy rules]. Interim report of the investigation New capital adequacy rules, SOU 2013:65. Stein, Jeremy C. (2013), Overheating in Credit Markets: Origins, Measurement, and Policy Responses. Speech at “Restoring Household Financial Stability after the Great Recession: Why Household Balance Sheets Matter”, research symposium sponsored by the Federal Reserve Bank of St. Louis, St. Louis, Missouri. Talley, Ian (2013), Fed Candidate Kohn Warns Easy Policy Leads to Imbalances. Real Time Economics, Wall Street Journal Blogs, 16 September. Taylor, John B. (1998), Monetary Policy and The Long Boom. Federal Reserve Bank of St Louis Review, November/December. Vredin, Anders, Flodén, Martin, Larsson, Anna and Ravn, Morten O. (2012), Enkla regler svåra tider – behöver stabiliseringspolitiken förändras? [Simple rules, hard times – does the stabilisation policy need to be changed?] (only in Swedish) Economic Policy Group Report 2012, SNS Förlag. 12  BIS central bankers’ speeches
In any case, I believe that the financial globalisation and the way it affects the conditions for monetary policy, including coordination with macroprudential policy, is a question that will continue to be discussed intensively in coming years. As an important problem is that exaggerated credit growth can arise in the countries to which capital flows, financial stability can hopefully be guaranteed by the frameworks for macroprudential policy that are now being built up.32 We will see how well these frameworks can resist the global forces in the “learning by doing” process we are facing in the macroprudential policy area. A more complicated world after the crisis Let me try to summarise. The fact that I have chosen cooperation as something of a theme is because, as I said initially, our world in the wake of the financial crisis appears more complicated than it was before – or at least more complicated than we thought it was. I think it has become more evident that monetary policy in individual countries is dependent on both what happens in other policy areas and on monetary policy in other countries. Of course, there has always been a need to get different policy areas to interact and support one another, and nor is it anything new that there are links between the monetary policies conducted in different countries. But my feeling is nevertheless that the financial crisis has in a way brought these relationships to a head.

Stefan Ingves: Monetary policy and financial stability in a globalised world Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, at the Stockholm School of Economics, organised by the Swedish Economic Association, Stockholm, 28 May 2014. *  *  *  Thank you for inviting me. This meeting at the Swedish Economics Association is one of relatively few occasions during the year when I have the opportunity to discuss rather more academic questions that I personally find interesting, but which there may not always be time to consider. At present, however, I am struggling in my day-to-day work with a number of issues where better research support is needed, so today I would like to raise both very concrete issues that are currently on the economic policy agenda, and more theoretical questions about the shaping of the policy. There is an overall theme in what I intend to say today, and that is “cooperation”. I will talk about cooperation between different authorities and policy areas in Sweden as well as cooperation at an international level. One reason why I have chosen to put a certain focus on cooperation is that I perceive that it has become increasingly difficult, or at least more complicated, to conduct a completely independent policy – partly because of the boundaries between the different policy areas having become less clear, and partly because of individual countries being affected perhaps more than ever by international events.
Some are also calling for a government of national unity… I am simply suggesting that joint action by consensus would be the best approach to take for the Spanish economy. It is up to the elected representatives to decide on whether or not the best approach, within a framework of understanding, is to make an explicit pact or establish a certain type of government. What conditions are required to reach an understanding of this nature? I think the important thing is to establish a framework of mutual trust and loyalty between the government and the opposition; and that is a two-way street. Banks are in a difficult position: at a time when they still have not restored their business models after years of low interest rates, the current scenario has again been prolonged indefinitely. How do you think this will affect the sector? 3/4  BIS central bankers' speeches  The banking sector is facing this situation from a much more robust position than ten years ago. It is true that it has profitability issues and the deep recession will affect its bottom line. But there are no solvency problems. The financial markets experienced some problems during the initial days of this crisis, but they were not caused by the banking sector. The situation has to a certain extent returned to normal, although not completely, while prices have partially recovered and volatility has eased.

This is a little unsettling, because during the last 20 years we have been successful in establishing as a better practice the approval of the compliance program by the board of directors. One might think that, if the board of directors approves the compliance program, then it should not be difficult for the chief ethics and compliance officer to get the business owners to pay close attention. The devil here, as in so many other places, lies in the details. It is usually the implementation of the compliance program that causes the conflict. It is usually related to the cost of compliance, because the cost ordinarily affects how the business owner measures success, which is the size of the business’ profit. The chief ethics and compliance officer will not be able to resolve the conflict easily, because compliance is a cost to the business which can make compliance the adversary of the business owner. The chief ethics and compliance officer will not want to bring a specific conflict issue to the attention of the board of directors. While this might be very effective in resolving the specific conflict, it could absolutely destroy her ability to function effectively thereafter. In a recent survey of chief ethics and compliance officers conducted by Price Waterhouse, the survey respondents identified as a problem their “struggle to gain the attention of the board of directors.”6 Two specific issues were identified.
Stability in the elemental sense I have described was profoundly threatened last autumn – when the universal crisis of confidence triggered by Lehmans’ failure tore the fabric of international commerce. That stability has been sustained owes everything to governments stepping in, effectively being prepared to borrow from the future in order to prop up the banking system now. In that sense, we are, of course, “beyond Financial Stability”, insofar as, ordinarily, we would regard instability as a state of affairs that requires such support. The Turner Report rehearses the analysis of how we got to that point. It rightly places weight on the baleful effects of persistent and cumulative global current and capital account imbalances. I dearly wish that the international authorities had taken on board the lessons from the 1990s EME crises about the vital importance of monitoring, and where necessary managing, national balance sheets – for large countries as well as EMEs. It is striking, however, that other analysts, including recently from the IMF, are starting to play down the part played by the international monetary system. I do not go along with that. There can  BIS Review 39/2009  1  surely be no disputing that macroeconomic imbalances have mattered greatly to the crisis, as they contributed to the build up of debt and, through the compression of risk-free rates and risk premia, the appreciation of asset prices. But in acknowledging that, we do not have to claim that of themselves such imbalances lead inevitably to financial instability.

Further, supervisors should be vigilant in ensuring that banks’ so-called “treasury” or “liquidity” portfolios are not concentrated in funding instruments, such as FRNs, issued by other banks. That turns out to have been all too prevalent. And they were not liquid when the music stopped. Years ago, regulators decided to deduct banks’ holdings of each other’s capital-instruments, to avoid the system as a whole generating illusory capital. The same principle could perhaps apply in liquidity regulation. The authorities also need to be clear about what level of stress, and/or what proportion of short-term liabilities, the stock liquidity buffer must cover. That must be a judgment for the authorities; and it must, as the Turner Report makes clear, be more demanding than in the past. But just as important, we must not imagine that the kind of modelling that can be applied to, say, credit risk and, perhaps, to some types of market risk can sensibly be carried across to liquidity risk. Liquidity goes wrong when there is, in the jargon, strategic interaction: I run (or sell) because I think you will etc. Liquidity buffers need to sustain confidence; if successful, the buffer is never needed. A time series of data showing low use of a liquidity buffer is not compelling evidence that a requirement was too high. Our successors must remember that in 10-20 years time. Of course, no liquidity buffer can be proof against all circumstances. Which is why central banks are in the business of providing liquidity insurance to the system.