samchain/econo-pairs-v1 huggingface dataset:
Michael C Bonello: The adaption of the euro Welcome address by Mr Michael C Bonello, Governor of the Central Bank of Malta, , during the concert held to mark Malta's membership to the euro area on Saturday, Valletta, 12 January 2008. *  *  *  You have joined us here today to mark a major milestone in our country’s economic history. During more than two millennia the Maltese people have used many different currencies in circumstances most often reflective of Malta’s status as a dependency of some larger and more powerful nation. The adoption of the euro, however, is a change of currency with a difference. This time it has taken place because Malta, out of its own choice, has joined fourteen other sovereign Member States of the EU in an economic and monetary union designed to complement the Single Market, a venture that could rightly be described as an epoch-making development in the history of our continent. For Malta, as for the other new members of the euro area, the euro offers the prospect of enhancing the economy’s potential to grow faster. The elimination of exchange rate risk and currency conversion costs should result in increased trade, while the low interest rate and inflation environment of the euro area should make for reduced business costs and greater macroeconomic stability. Combined with the fiscal discipline associated with monetary union, this should translate into higher credit ratings and improved investment prospects.

But it would be disappointing if that debate degenerates into recrimination and antagonism. That would be to obscure the remarkable consensus that now exists - throughout the European Union and indeed more widely, and across a broad spectrum of political opinion within the countries of Europe, including this country, on the broad approach to macro-economic management. This unforced consensus extends to monetary policy directed to price stability, and it extends to budgetary policy directed to medium and longer-term fiscal sustainability. There is growing recognition, too, across the continent, of the importance of structural policy directed to supply-side flexibility. This strengthening consensus is fundamentally important - more fundamentally important, in terms of the economics of it at least, than whether these common objectives are pursued inside or outside the framework of monetary union. Pulling these thoughts together, it would be a mistake in my view for monetary union to go ahead without reasonable confidence of genuine, sustainable, convergence between its members; and it would be a mistake for any individual country to seek to join, or to be permitted to join, unless it had achieved genuine, sustainable, convergence. If there are serious doubts - generally or in any particular case - it would be in no-one’s interest to proceed. But it would be just as big a mistake, if monetary union does not go ahead, or for countries on the outside, if individual governments saw that as an opportunity to seek to take short-term advantage of the apparent macro-economic freedom that that gave.
However, despite progress in recent years, Spain’s share in some potentially very dynamic markets is still low and faces major challenges, in a world of growing competitive pressures and the globalisation of production channels. Nor should it be forgotten that our economy’s dependence on energy and capital goods imports and the high net payment of income to the rest of the world, as a result of high external indebtedness, are a permanent constraint as regards achieving the surpluses on current and capital account that are needed to deleverage our economy. Institutions and financial policy for the internationalisation of Spanish companies Internationalisation calls for a series of financial services in which the banking industry plays a central role. These services can be grouped into two major categories: operations geared to mitigating the risk of transactions, namely guarantees and insurance; and those geared to providing liquidity or financing to companies. On the data available, regarding the importance of banks in financing international trade, banks participate directly in approximately one-third of global trade. On one hand they offer financing, usually short-term in nature, which responds to the exporter’s or importer’s liquidity or working capital needs. They also offer coverage for risks through guarantees or insurance, ensuring the successful completion of transactions for the customer. Moreover, the extension of coverage for credit risk facilitates – albeit indirectly – access to financing by reducing risk on the company’s balance sheet and, consequently, reducing the financial cost of the transaction.

This trajectory is all the more significant when compared with events in other developed economies and, in general, in the euro area as a whole, where export shares fell during the crisis. Our sound export performance has been underpinned both by gains in competitiveness and the pick-up in external demand, as well as by more structural factors, allowing us to expect this potential to continue and become more entrenched in the long run. The structural factors include the geographical diversification of exports of Spanish goods and services to emerging markets and the more export-oriented gearing of our companies, which is reflected in the increase over recent years in the number of Spanish companies competing on international markets. The re-directing of exports towards emerging markets has contributed significantly to these developments, thanks to the substantial dynamism of the demand for imports in those BIS central bankers’ speeches  1  countries. Indeed, their dynamism has compensated for the cyclical weakness in the developed countries, particularly in the euro area. The relative weight of goods exports to emerging countries has increased since 2007, coming to account for 30% of the total. The increases have been across the board, although particular mention may be made of Latin America, China and North Africa. However, the share of the developed countries has fallen on the same scale, owing to the loss in the weight of sales to the euro area, which at end-2013 stood slightly below 50%.
Outstanding bank lending to corporates is rising at a faster pace in France than anywhere else in Europe: +4.5% year-on-year at end-November 2015, compared with +2.1% in the United Kingdom, +1% in Germany and an average of +0.9 % for the euro area as a whole. In fact, based on the responses given by business leaders to our surveys, it seems that applications for investment loans are generally accepted fairly readily, and the same seems to apply, more or less, to cash loans. Although difficult to measure, firms’ willingness to apply for loans appears to be strong. Surveys conducted by the ECB show similar results, and rank France on a par with Germany in terms of access to credit and willingness to apply for loans, well ahead of the other major countries in the euro area. Interest rates on loans are also lower in France than anywhere else in the euro area – by around 1 percentage point in the case of individual loans of up to EUR 250,000. With regard to today’s topic, however, there are a number of important distinctions that need to be made. Access to credit is markedly more difficult for VSEs than for other SMEs: –  fewer than 60% of applications for cash loans were accepted (i.e. granting of 75% or more of the requested amount) in the third quarter of 2015, compared with 74% for SMEs.

The CCB should increase resilience by ensuring that an additional buffer of capital is built up gradually during the boom, a buffer that can then be released to cushion losses in an eventual downturn. It thus limits the threat of vicious fire-sale spirals. Moreover, by increasing the relative cost of providing credit, the CCB should help to lean against the build-up of excesses. In addition, the buffer is designed in such a way that it can be implemented on a broad basis or can target specific segments of the credit market only. Currently, for instance, signs of a build-up of excesses in the Swiss credit market merely relate to the domestic mortgage and residential real estate markets. Thus, if the buffer were to be activated, it would be aimed solely at this segment of the credit market. Not least, a CCB is one of the key components of the reforms of international financial regulation (Basel III framework). It will be introduced by most countries within the next few years. In this context, criticism has been raised that an early introduction of the CCB would cause competitive disadvantages for the Swiss financial sector in international comparison. For various reasons, this criticism is invalid. First, the CCB will be activated only if deemed necessary; most of the time, it is likely to remain turned off. Second, if activated, the CCB would be applicable to Swiss banks and to subsidiaries of foreign banks in Switzerland, ensuring a level playing field.
4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Chart 5: The distribution of capital flows to emerging market economies Unconditional distribution  Probability density 0.10  Negative shock  0.08 0.06 0.04  A  B  0.02 0.00 -8  -6  -4  -2  0  2  4  6  8  10  12  14  16  18  Capital flows as a % of GDP  Sources: IMF and Bank of England staff calculations. Notes: This chart shows the unconditional distribution of capital flows to EMEs over 2006-2018, and an estimated distribution conditional on a one standard deviation negative shock to pull factors. The diamonds highlight the fifth percentile, which is our preferred measure of Capital Flows-at-Risk. We estimate several quantiles of the distribution through quantile regression and then fit a skewed-t distribution; hence, the distribution can both shift and change shape in response to shocks - see annex for further details. The grey line in Chart 5 shows the unconditional distribution of capital flows, and the purple line shows how the distribution shifts in response to a negative shock. “Capital Flows-at-Risk” are defined as capital outflows in a severe, low-probability event (that with 5% probability or less). The left tail ‘fattens’ if bad outcomes become more likely and/or the “5% probability event” becomes more severe – shown by the shift from A (Capital Flows-at-Risk of 1.2% of GDP) to B (Capital Flows-at-Risk of 4.2% of GDP).

This is why there is an urgent need to agree on concrete short-term commitments for structural reforms in the Member States, on a consequent application of the Stability and Growth Pact, on the aggregate fiscal stance for the euro area, on a strategy for investment, and to launch work on a long-term vision to further share sovereignty ensuring the sustainable and smooth functioning of EMU. On that note, I am looking forward to our discussion. 4  BIS central bankers’ speeches
The ECB has announced a quantitative reference value for broad monetary growth as measured by M3, the first reference value for M3 growth being set at an annual rate of 4.5%. This reference value is consistent with the maintenance of price stability over the medium term, while allowing for sustainable output growth and assuming a trend decline in the velocity of circulation of M3. In setting the reference value for monetary growth, the Governing Council emphasised its medium-term orientation. Substantial or prolonged deviations of current monetary growth from the reference value will normally signal risks to price stability in the medium term. The ECB does not intend to react to deviations of monetary growth from the reference value in a mechanistic way. In the first instance, such deviations are analysed thoroughly to infer any signals which they may give about the prospects for price developments. If the deviation points to a threat to price stability, monetary policy has to react in a manner appropriate to counter this threat. Although monetary data contain information which is important for monetary policy decisionmaking, monetary developments alone clearly do not constitute a complete summary of all the economic information necessary for appropriate policy decisions to be taken. Thus the Governing Council emphasises that it is important, in parallel with the assessment of monetary growth, to look at a wide range of financial and other economic indicators, including economic forecasts.

The elimination of this main risk will also foster the development of uniform market standards so that government bonds in the euro area will become rather close substitutes, creating a large and liquid bond market. Obviously, this requires sound and sustainable budgetary policies that ensure that credit risk spreads remain small. Concluding remarks Following a remarkable period of disinflation in most member states, the Eurosystem has had the good fortune to commence its operations in an environment of price stability. The success enjoyed by the euro in its first five months can be certainly attributed to a number of factors. Above all, the successful efforts of member states made possible a smooth changeover to the euro. The independence of the ECB and the clear mandate to maintain price stability were 7  BIS Review 60/1999  crucial for ensuring a high degree of credibility of the Eurosystem’s monetary policy. As a final observation, I should simply like to mention that without the positive echo of financial markets and the permanent support of banks and financial institutions, a single currency in Europe could not have become a reality. BIS Review 60/1999  8
Indeed, taken at face value, it would suggest there have been virtually no costs of achieving higher levels of capital across the global banking system, at least among most global banks. While credit conditions have clearly improved since the crisis, it is possible that the recovery in lending might have been stronger still had capital requirements risen by less. To begin to analyse that question, Chart 16 compares the change in bank capital since Basel III was introduced with subsequent lending growth among a panel of large international banks. On average, lending growth has been positive over this period, consistent with Cecchetti (2014). But credit growth has also tended to be statistically significantly lower among banks that have seen the largest increase in their capital ratios. On average, banks that have increased their capital ratios by an extra one percentage point have provided 4% less in cumulative credit since Basel III was introduced (3.5% less if we exclude European banks). This is very similar to the estimates used by the FSB’s Macroeconomic Assessment Group (2010), which reported a range of estimates from -0.7% to -3.6%. There are of course different possible interpretations of this negative relationship. Banks facing weak macroeconomic conditions may simply have seen a reduction in loan demand and responded by maintaining higher capital buffers on a voluntary basis. To parse these conflicting interpretations, we turn to recent econometric evidence on the impact of higher capital requirements.

  Euro area countries have taken rapid and significant steps to bring their public finances back into balance and going forward to restore the competitiveness of their economies. This is clearly the case for countries whose debt markets have been the most affected over the past months.   Yet, in May, financial markets started to seize up again, admittedly in a slightly different way than that seen in 2008, but with the same potentially disastrous consequences, that is to say a drying up of financing for the economy. In 2008, the financial system was badly impacted by the subprime crisis and the failure of Lehman Brothers that brought transactions to a standstill as market participants realised that any bank, no matter how big, can fail especially since the exact amount of exposure to subprime risk of all institutions were not fully known. In the May 2010 episode, the same dynamics were at work: the different investors started to believe that euro area countries could default on their debt, and therefore stopped lending to these countries or their banks, or to any banks with possible exposure to these countries and, finally, as a precaution, ceased all lending activity. This situation called for rapid and decisive action by the ECB because:   We cannot implement monetary policy in dislocated markets that do not effectively allocate the liquidity that we inject or that radically modify the effects of our monetary policy by offering interest rates that are inconsistent with our key rates.
In the absence of a conceptual framework, EME central banks facing large capital flows have had to experiment with the tools at their disposal – such as foreign exchange intervention, macroprudential policies, and capital flow management measures. There is now a rich body of policy experiences, especially in emerging Asia, crying for a theoretical framework. We need a framework that provides coherence not only across these various policy tools but also with traditional monetary and fiscal policies. There is an active research agenda at the BIS on such an integrated policy framework. As a practitioner of some of these policies, MAS is delighted and honoured to organise this conference together with the BIS. What is the Big Deal with Capital Flows? When central bankers from advanced economies meet, they discuss quantitative easing and r-star (the natural rate of interest). When EME central bankers meet, they talk about capital flows. What’s the big deal with capital flows? First, capital flows to EMEs have become quite large. Annual gross portfolio inflows have grown to an average 1.3% of EMEs’ GDP in the eight years following the global financial crisis, compared to an average 0.7% during the eight years prior. [1] A key driver of the surge in cross-border capital flows has been the prolonged period of nearzero interest rates and highly expansionary monetary policies in the advanced economies. There is empirical evidence that quantitative easing policies in the US have made capital flows to EMEs more procyclical [2] . Second, capital flows have become more volatile.

Speeches  Published Date: 26 May 2021  "The Quest for an Integrated Macro Policy Framework" - Opening Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at Asian Monetary Policy Forum and MAS-BIS Conference on Macro-Financial Stability on 26 May 2021 Mr Agustín Carstens, General Manager, Bank for International Settlements, ladies and gentlemen, good a ernoon and welcome to this year’s special edition of the Asian Monetary Policy Forum featuring the MAS-BIS Conference on Macro-Financial Stability. Macro-Financial Stability: Theory Trying to Catch up with Practice The origins of this conference go back to a conversation that Agustín and I had about 18 months ago on the need to crystallise a coherent policy framework for macro-financial stability. For the three decades preceding the global financial crisis, the traditional inflation targeting framework for monetary policy has served most economies well, delivering price stability as a basis for sustained economic growth. That framework is now coming under strain. Emerging market economies (“EMEs”) faced with large and volatile international flows of capital have had to resort to a variety of policy tools besides traditional monetary policy to achieve both macro-economic and macro-financial stability. The advanced economies faced with rising leverage and growth in financial assets against the backdrop of extremely low interest rates are also looking at macroprudential measures to promote financial stability. Practice has moved ahead of theory.
4  All speeches are available online at www.bankofengland.co.uk/speeches  4  And the TCFD is here to stay through the power of market uptake - with 250 major companies representing $ trillion of market capitalisation and financial institutions (banks, insurers and asset managers) responsible for $ of assets already having committed to make these disclosures and to talk to the users of information about how to sharpen and refine what disclosures are provided. Green Finance It’s perhaps less obvious that I, as a regulator and central banker, but wholly understandable that many of you here in the room, might be focused on the opportunities as well as the risks from climate change – and specifically the opportunity to ‘mainstream’ Green Finance. Unfortunately, measuring and tracking green financing comprehensively is difficult, partly due to the lack of criteria, indicators and a clear taxonomy, and so an absence of proper green labelling. But we can accurately measure the labelled green bond market. This has continued to develop rapidly: issuance reached over $ in 2017, and is forecast by some to pass $ this year overall. There have also been significant innovations in recent years. For example, the Agricultural Bank of China issued a green RMB bond and Bank of China issued the first ever green covered bond in 2016. We have also seen an increase in sovereign green bond issuance including from Poland, France and Nigeria. 4  But whilst welcome, this is not enough.

The weakness of bank lending over the recent past has motivated much discussion on the reasons behind this and on the best policies to deal with the situation. In order to define these best policy measures, it is important first to fully understand the behaviour of this phenomenon and to identify possible frictions in the credit market that may be hampering its recovery. With this in mind, I will next provide an overview of the main factors explaining recent credit developments in Spain: first, in the context of the crisis period, and then in the current recovery phase. I will conclude with some reflections on possible policy considerations. 2. The determinants of bank credit in Spain during the crisis  When analysing the factors behind the contraction of bank lending during the crisis it is useful to distinguish between demand and supply elements, even after discounting the practical difficulties in separating both components. 2.1. Demand-side factors  Starting with the demand side, several factors contributed to the sharp reduction in the demand for credit during the crisis. First, loan demand fell sharply as a result of the deterioration in economic conditions, which limited current and planned spending levels and, hence, the need for new credit. Second, the need of households and non-financial corporations to deleverage and rebuild a sounder financial position is another factor behind the pronounced slowdown in credit demand.