samchain/econo-pairs-v1 huggingface dataset:
Undue exuberance on the part of investors, when price-earning ratios grow beyond fundamentals, or on the part of bankers who failed to assess the impact of high interest rates on collateral or cash flows, would expose both the investor and the lender to asset losses. 17. Specifically, banks in Asia, having easier access to funds as a result of high global liquidity, were able to expand lending much more quickly and, thereby, incurred higher risks in their portfolios that they need to manage more soundly. Ironically, domestic banks may have been induced to move into more risky lending due to increased competition in the form of new entrants and financial intermediation. There is no question that they need to manage these new risks better. 18. There is also one distinguishing feature of the Asian turmoil. The debt problems have not been those of the public sector. On the contrary, the fiscal positions of Asian governments have by and large been quite sound. East Asia, excluding Japan, ran a fiscal surplus of $ billion BIS Review 109/1997  -4-  or 0.1% of GDP in 1996. The debt burden, in fact, has been largely one of private sector overborrowing. The resolution of the debt of the private sector makes the Asian problems quite different from the experience of the sovereign debt issues of the 1980s. 19. In essence, the Asian problem is the age-old question of efficient resource allocation.

That is, both current and future residents are willing to pay the tax cost of servicing this debt because of the benefits that they receive from the services supported by that debt. Now consider a different scenario – one in which the jurisdiction is borrowing to pay for a current year operating deficit. This kind of borrowing is inconsistent with running a balanced budget, which is in principle required in all but one state. But, as people in this room are well aware, states and localities can often find ways to “get around” balanced budget requirements if they are determined to do so. One example of this was New York City in the 1960s and early 1970s, where annual operating deficits were repeatedly financed with shortterm debt, until the fiscal crisis exploded in 1974–1975. The key distinction between these two types of borrowing is that in the former case an asset is producing services that help to offset the cost of the debt, but this is not so in the latter case. Indeed, using debt to finance current operating deficits is equivalent to asking future taxpayers to help finance today’s public services. When this occurs, it means that the fiscal surplus offered by the jurisdiction in the future will be diminished by the value of these additional debts. That is, in the future, the cost of servicing this debt will drive a wedge between the taxes paid by households and businesses, and the current services provided to them.
Mr. Chairman, the near collapse of the financial system has in turn led to a rapid and deep global recession – the sharpest since World War II and the first in which all regions of the world were suffering a downturn in fortunes at the same time. This downturn may well have its most devastating impact on poor countries, particularly in Africa – who incidentally were not responsible for the crisis. It is worth asking the question that if the basic insights on the powerful impact that a lack of information could have on markets was known as far back as 1970 – why were these lessons not assimilated into the policy making tool kit of central banks or in the financial architecture of our economies? BIS Review 95/2009  1  Mr Chairman, I have no doubt that perhaps a large part of the answer to this question is in the fact that the 1970s had a very different financial environment when compared to our current environment. As the financial markets developed, driven by technological and financial innovation and the deregulation of financial services, financial institutions were able to price and sell risks through ever more complex financial products. The very nature of complexity of these products created the asymmetries in information that has proved catastrophic to the world economy.

I must admit here that initially this seemed to cause more harm than good – a little knowledge truly did seem a dangerous thing now that we had opened ourselves up to the media. The greater access to central bank officials and information, e.g. through our website, without the full understanding of issues on the part of journalists seemed to fuel erroneous stories. However, our perseverance over time has meant that the level of understanding and quality of questions has improved significantly. As a result, the level of reporting has also improved – although much work still needs to be done. Today issues surrounding the causes and likely impact of the global financial and economic crisis have been covered in a more balanced way with a greater thoughtfulness on the economic linkages and Government policy – as well as with increased reference to related developments around the world. Mr. Chairman, following on from the media seminars, six years ago the Bank of Zambia began conducting seminars for members of Parliament – particularly members of oversight committees such as the Committee of Economic and Labour Affairs and the Public Accounts Committee. Again, what we have seen is a greater appreciation by members of Parliament of the challenges facing the central bank in the implementation of monetary policy in particular and economic policy in general because the central bank is often called upon to comment on the Government’s economic policies as well.
Since 2007, many branches of foreign banks have become members of the Norwegian scheme to increase their deposit to loan ratio. This is not purely coincidental. The Norwegian scheme is probably slightly naïve in its design. As mentioned, the amount guaranteed is very high, and there has been a period without fee payments. At the same time, the competition for deposits has intensified at home and abroad. There is an element of moral hazard associated with any insurance scheme. In Norway, even depositors with very large deposits do not have to assess the financial strength of a bank. Our deposit guarantee scheme has a flypaper effect, and under the protection of the scheme the banks have bid up deposit rates to strengthen their liquidity. This will eventually have an effect on lending rates as well.

Benoît Cœuré: Interview with Politico Interview with Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, and Politico, conducted by Mr Pierre Briançon on 23 March 2016, and published on 30 March 2016. *  *  *  The last Governing Council meeting on 10 March seemed to be marked by some ambiguity on negative interest rates. On the one hand, the message was that rates wouldn’t get much lower. On the other, there was the signal that there could be exceptions… The question we are always trying to address is how to design our policy so that it is effective in the situation we face at a given moment. The package announced on 10 March was very potent, both in intensity and in sheer volume. Negative interest rates are not our main instrument, they just support our overall policy. And looking ahead, we’re not short of instruments – our choice is quite large. We will be able to deal with adverse situations if necessary. You indicated that the ECB wasn’t deaf to the banking sector’s concerns about the impact of negative rates on banks’ profitability. Banks’ profitability has improved when you look at the global overall impact of our monetary policy, that is, stronger credit demand and lower risk in the economy. And, as a matter of fact, the interest margin of banks has gone up, not down. Of course, the impact is different depending on banks’ business models and on how negative the rates are.
For a number of decades in the middle of the 20th century there was a notable absence of serious bank crises; one explanation may be that credit markets were tightly regulated. But the regulations also created other problems, though it would take too long to go into that here. Around the 1890s, when the Swedish economy took a great leap forward, new banks were established in quick succession and credit expanded rapidly. This was followed by massive price increases for shares and real estate. The bank crisis that occurred when the boom finally peaked in 1907 had far-reaching consequences: four banks closed, five were reconstructed and fifteen smaller banks were taken over by larger establishments. After world war one there was a new wave of speculation. The prospect of large profits and the inflow of capital contributed to a stock-market boom when bourses achieved a breakthrough as suppliers of venture capital. In 1918 the Stockholm Exchange reached a turnover that at constant prices was unrivalled until the late 1980s. Another factor behind the flourishing stock markets was that commercial banks lent more and more extensively with shares as collateral. The trend ultimately peaked and the mood became less optimistic, as sooner or later it always does. When the high value of the risky assets that had served as collateral fell, a crisis was precipitated in the banking system as well as in the economy as a whole.

Ladies and Gentlemen, the mere fact that a central bank has to conduct monetary policy in a transparent manner at best results in the availability of the information necessary in order to judge the bank’s performance. Discussions of this information are not only done by the government but also most importantly, the public at large. The latter’s perception of what the central bank does and how it is done may have an impact on the central bank performance. Furthermore, Mr. Chairman, our contribution therefore should set out to develop the pillars on which central bank governance must rest. These include operational independence, accountability and indeed transparency which are complementary. Yet, certain tensions between these elements of governance cannot be ignored and have to be observed when establishing a code of good governance. With respect to operational independence, there seems to be consensus among academics and central bankers that central banks must be given a charter which includes a strong commitment to price stability, and the freedom and sufficient scope to pursue it. This means that while central banks may not have goal independence, they should have operational or instrument independence to effectively pursue their primary objectives. In a democratic society, transparency and accountability are essential if central bank independence is to remain “acceptable to the public”. Providing for a sufficient degree of transparency can help not only to increase the understanding of monetary policy which ultimately enhances central bank credibility.
Worry over these tendencies increases if one takes into account the fact that future retirements may further limit the labour supply. However, let us leave the discussion of the labour supply and concentrate instead on the productivity aspect. The combination of price stability and budget stability is an important explanation for the development 1 in productivity. Price and budget stability increase households’ and companies’ willingness to make long-term decisions. Stable prices also entail better information value in relative prices, which improves the allocation of resources. If we consider other factors that have stimulated the upturn in productivity in recent years, there are several central changes. One generally seeks explanations in factors such as technological developments, education, competence and incentives among the work force, as well as the allocation of resources in society. At the same time, the pressure on companies to use resources efficiently has increased during the 1990s. Greater competitive pressure resulting from both increased internationalisation and deregulation in various sectors has increased the need for companies to economise their scant resources. Less extravagant use of resources means that the labour force and capital are employed in other areas where they contribute better to the national economy. Although the changeover can be difficult for those who lose their jobs, a better allocation of resources is a necessary condition for improving welfare. Openness is important Productivity is also affected by a country’s capacity to utilise technological progress in other countries.

As always, we are monitoring developments carefully and in connection with the Monetary Policy Update in April will make a renewed assessment of the international outlook in which we will also take into account how events in Japan may affect the development of the global economy in the slightly longer term. Sweden At the latest monetary policy meeting in February, we decided to raise the repo rate from 1.25 per cent to 1.50 per cent and our assessment was that the repo rate would need to be increased to 3.6 per cent by the end of the forecast period, that is in three years’ time. My assessment was that we will need to raise the repo rate by 0.25 per cent at every meeting in 2011 to 2.75 per cent at the end of the year. This entails a somewhat steeper upward path in the second half of 2011 than the repo-rate path presented in the main scenario of the Monetary Policy Report. However, in light of the uncertainty about the development of interest rates, I did not enter a reservation against the repo-rate path but confined myself to commenting on this at the meeting (see Figure 17). I will now discuss my view of monetary policy in the years ahead in a little more detail and take the picture of the economic outlook presented in the latest Monetary Policy Report as my starting point.
There is also a need to close important information gaps on the rules that will govern global CCPs, including the criteria for mutual recognition of CCPs and membership conditions, as well as details on the arrangements to mitigate the concentration of risk to the CCP itself or its members. These gaps are currently limiting a more complete assessment of domestic and regional options for central clearing. The global reforms for the most part would contribute to the promotion of more consistent approaches to regulation which is an important precondition for greater financial integration in Asia. In a number of countries, the global reforms have had a role in accelerating further domestic priorities to strengthen financial resilience. Initiatives that are being advanced at the global level also work to strengthen regional financial stability arrangements. This includes putting in place more robust frameworks for the oversight of systemically important financial institutions at a regional level. Within Asia, a clear evolution of such frameworks can already be seen in the operationalisation of cross-border supervisory colleges for financial institutions with a significant regional presence. The reforms have further encouraged closer coordination and communication on financial stability developments between countries in the region. This has been borne out of common perspectives and challenges shared among countries in the region on the direction and impact of the reforms, and the need to bring forward the collective views of the region. These implications will further strengthen the foundations for regional financial integration in Asia.

I am pleased to now introduce the first President and Dean of the Asia School of Business, Professor Charles Fine. Professor Fine is the Chrysler Leaders for Global Operations Professor of Management, and a Professor of Operations Management and Engineering Systems, at MIT Sloan. He has served as a Professor at MIT Sloan for over 30 years, and has teaching experience as a visiting faculty at the Stanford Business School, the Harvard Business School and the Indian Business School. His research focuses mainly on supply chain strategy and value chain roadmapping. His work has supported the design and improvement of supply chain relationships for companies in the electronics, automotive, aerospace, communications, and consumer products industries. Kindly join me in welcoming Professor Fine. 2  BIS central bankers’ speeches
In these circumstances, the Committee can extend the horizon over which it returns inflation to target if doing so achieves a better balance between the scale and duration of the deviation of inflation from target and the variability of output. This same framework can be used to think through the implications of the dominance of the US dollar in international trade and invoicing. In particular, in a DCP world with sticky dollar prices, a depreciation driven by strength in the dollar will tend to result in additional imported inflation. Rather than tightening monetary policy to offset fully that exogenous increase in imported inflation through lower domestic inflationary pressures, policymakers would do better to trade off inflation and output volatility, accepting some increase in imported inflation to achieve a smaller reduction in domestic demand below potential. The ability of new exporters to benefit from the depreciation by undercutting existing dollar contracts would provide some boost to exports and help lessen the trade-off facing the monetary policy maker. A similar strategy could be pursued in the face of large financial spillovers. The ability to do this depends heavily on the credibility of the monetary policy framework and the transparency with which the strategy is pursued. As I will go on to discuss, both can be reinforced by explicit recognition of the spillovers of the IMFS, particularly if recognised in IMF surveillance.

And the results slip reads pretty well. In particular, the inflation target was instrumental in anchoring the credibility of policy, without which the MPC would not have been able to respond so aggressively. Without credibility, there can be no flexibility. And the MPC has used that flexibility to the full, providing extraordinary levels of stimulus to support growth and jobs. But the nature of the inflation targeting framework meant that it dropped a few marks in terms of helping the MPC to communicate the role monetary policy played in supporting the recovery. That risked undermining the democratic legitimacy of inflation targeting. Likewise, the inflation target on its own was less suited to explaining the MPC’s view of the appropriate trade-off between the speed with which inflation is returned to target and the support provided to the fledgling recovery. The forward guidance announced by the Committee retains the primacy of the inflation target while allowing the Committee to more effectively tackle these communication challenges. In so doing it enhances the transparency and accountability of monetary policy. The guidance also provides a robust framework in which the MPC can explore the scope for economic expansion and helps to provide greater clarity about the likely path of monetary policy as the economy recovers. The inflation target remains front and centre in the conduct of UK monetary policy. Price stability remains the primary objective of monetary policy.
We need a fiscal instrument of the sort proposed by President Macron a few years ago. An instrument that has the capacity to act countercyclically and that complements monetary policy. But it’s something you were already asking for when you were a minister, and it’s not happening now, and even in the best of cases it won’t happen for another four or five years. And without that level of firepower… We have to call for it because it is sensible. It is not a question of whether it is possible, but rather one of reality. It would be very important for the entire euro area and I am convinced that it will come about sooner rather than later. What are your thoughts on the Spanish economy? The Spanish economy is doing well. It is competitive and enjoying above-average growth, and that is the result of the reforms in 2012 and 2013 and society’s efforts. It is doing well, that’s the truth. It has been affected by the economic slowdown, like the rest of the euro area, but growth is still at 2%. Why? The financial sector was cleaned up, and the economy is now competitive. Those are the two reasons why it is doing better. Spain didn’t have any issues during the growth phase of the cycle. But now we are maybe seeing the effects of not having made any reforms in recent years, deferred budgets, or adjusted deficits during growth periods. My recommendation is for the euro area as a whole, not just for Spain.

CPIF close to 2 per cent at the end of the forecast period With regard to inflation measured in terms of the consumer price index, CPI, future developments will be affected by the rise in interest rates, or rather by the increase in households’ mortgage interest expenditure. This is clearly visible if one looks at the same time at CPIF inflation, which quite simply is CPI inflation with a fixed mortgage rate. The CPIF is thus not directly affected by changes in mortgage rates, which means that these measures differ quite considerably over the coming years, although they approach one another further ahead. Both CPI and CPIF inflation rose in the months prior to the publication of the Monetary Policy Report (Figure 9). This was mainly due to rising energy prices, but also to weak productivity growth and to the previous year’s weaker exchange rate having a delayed impact. However, data published two weeks ago show that both the CPI and the CPIF fell in January. During 2010 CPIF inflation is expected to fall, primarily as a result of companies’ costs falling and the krona strengthening, which is expected to make imports cheaper. The rate of increase in the CPIF will rise from 2012 and onwards as economic activity improves and companies’ costs begin to rise again. At the end of the forecast period, we expect inflation measured in terms of the CPIF to be close to 2 per cent. However, CPI inflation is expected to continue to rise.