samchain/econo-pairs-v1 huggingface dataset:
William C Dudley: Update on economic and fiscal conditions in Puerto Rico Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, to the Association of Certified Public Accountants of Puerto Rico, San Juan, Puerto Rico, 24 June 2014. *  *  *  Good afternoon. I thank you for the opportunity to address your association. It is always a pleasure to speak with the different communities that make up the Second Federal Reserve District and it is especially gratifying to be here in Puerto Rico. As with other parts of our District, the New York Fed is dedicated to the people of Puerto Rico and to their future growth and prosperity. Our commitment is reflected in our ongoing work with our many partners in Puerto Rico. Over the past several years we have held three forums (cosponsored with the local Small Business Administration office, the Puerto Rico Small Business Development and Technology Center and the Federal Deposit Insurance Corporation), which provided technical assistance to help small businesses access capital, procure government contracts, and export their products and services. We also continue to promote financial literacy through our ongoing partnership with the Puerto Rico Bankers Association, and we have cosponsored the Financial Awareness Video Festival working with students at local colleges to produce short videos highlighting aspects of financial literacy. Let me just pause for a moment to say congratulations to this year’s winner: Pontificia de Ponce.

It is now widely accepted that these are determined by factors that are not directly affected by monetary policy, such as the rate of technological advances and the efficient functioning of various markets. In general terms, one can say that the policy conducted by the Riksbank is aimed partly at limiting the inevitable deviations from the inflation target and partly at ensuring that the real economy does not fluctuate excessively. The objective of monetary policy is price stability, but the Riksbank also considers real economy considerations to be important. This is characteristic of what is known as flexible inflation targeting, which as far as I know, is conducted by all central banks that have inflation targets. Monetary policy affects the economy with a certain time lag. Monetary policy decisions must therefore be based on forecasts of future inflation. Normally, monetary policy is aimed at achieving the inflation target within two years to avoid the deviations from target from being too large and too protracted. This two-year horizon can be regarded as a restriction that the Riksbank has placed upon itself as a means of upholding confidence in the inflation target. At the same time, it provides an opportunity to show consideration for the real economy.
The costs of such failures were enormous, with prices rising by 750% in the twenty-five years to 1992, more than over the previous two hundred and fifty years. Unemployment was high and growth volatile. The inflation target rose from the ashes of the ERM debacle twenty five years ago this month, marking the point when price stability became the unambiguous objective of UK monetary policy. The new framework was a success, though only a partial one. That’s because, with interest rate decisions still made by the Chancellor, it wasn’t fully credible. Experience teaches that political control of monetary policy decisions suffers from time inconsistency, in which policymakers promise low inflation, then go for faster growth and ultimately achieve neither. Conversely, welfare can be improved if governments first choose the preferred rate of inflation and then delegate operational responsibility to the central bank to achieve it. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  The UK Framework for Monetary Independence So it was in 1997 when Gordon Brown boldly gave the Bank of England operational control for setting monetary policy. The Bank of England Act of 1998 clarified – for the first time in three centuries – the Bank’s responsibilities. 1  It gave a new independent body of the Bank, the MPC, a clear remit to achieve the inflation target over the medium term. The inflation target is symmetric (meaning we care as much about returning inflation to target from below as from above), and it applies at all times.

These are the best contributions the Bank of England can make to the good of the people of the United Kingdom. **************************** Ultimately, the prosperity of the UK will reflect not just the final Brexit arrangements but also the government’s fiscal and structural policies. The first speaker at this conference is the best placed to address these topics. It could, however, have been very different. As some of you may know, the Prime Minister began her career as a new graduate at the Bank before leaving after six years to pursue other interests – ultimately politics. Whilst at the Bank, the Prime Minister worked in the Economic Intelligence Department – then the cutting edge of our activities. During her time she accomplished great things and was destined for much more. Just imagine what could have become of your career, Prime Minister, if you had stayed at the Bank: you could have been in Fishmongers Hall…  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  Instead you came here by a road less travelled. Theresa May was elected as MP for Maidenhead in 1997, just as the Bank was getting to grips with its newfound monetary policy independence. She held a number of positions in the shadow cabinets of a string of opposition leaders and served as the Chair of the Conservative Party. After the formation of the coalition government in 2010, she would become the longestserving Home Secretary in over 60 years.
Inflation’s convergence in the run up to Stage Three has been checked, however, and recently the spread has even become wider. This is hardly surprising in itself, neither is it a major problem. The process known as catching up means that countries with a below-average level of prosperity initially will benefit from technological and organisational advances elsewhere and accordingly grow faster than the rich countries, which in turn can lead to higher inflation. Furthermore, countries with strong export-led growth can experience upward wage pressure in other sectors, too, leading ultimately to higher inflation. So there are reasons why growth rates as well as rates of inflation can diverge in a monetary union without this being unnatural or a problem for either the countries in question or the union as a whole. It seems fairly evident that elements of this kind of “more innocuous” inflation are around at present. The clearest example is Ireland, with catch-up effects and a number of years of exceptional productivity growth. But even there the picture is not unambiguous and when inflation now increases in a number of member states, questions arise about the formation of stabilisation policy. This is definitely not a problem that can be tackled with measures of monetary policy. The function of monetary policy is to maintain price stability in the union as a whole, a mandate that seems to be generally supported and understood. Neither is there any cause to criticise how monetary policy has been conducted in practice.

However, even if there are rewards to be earned from coordination, it will probably be some time before the EU member states are sufficiently mature to take further big leaps. Ultimately it now boils down to the sensitive issue of how much power should be placed in European rather than national hands. But there is no doubting the strength of the tension between the single monetary policy and the remainder of economic policy that is still handled at national level. In this tension lies the seeds of continued economic policy coordination in Europe. 5  BIS Review 102/2000
To a considerable degree, the banks’ high CDS spreads could be a consequence of their enormous borrowings on the global markets, together with the unusual circumstances currently reigning in the financial markets. The Icelandic banks’ CDS spreads now range from 4% to over 6%. Well-known international banks must also tolerate high premia, even though they are lower than those in Iceland. For example, the American investment bank Bear Stearns has paid a premium of 3½% and over on five-year CDS agreements, and Lehman Brothers and Merrill Lynch have been charged 2% and over – not far from the premia charged to Landsbanki until very recently. The CDS spreads of many large, well-known international banks have risen by 0.4 – 0.8% so far this year. It may be mentioned that the proptional increase of the CDS spreads of the Icelandic banks over the last two years has not been greater than of many other and better known banks. This fact does not, however, improve their position in the captial markets. The CDS spreads charged to Icelandic banks mean that they do not currently have access to international funding on acceptable terms. The pricing of international loans is based on CDS spreads, especially if liquidity is limited in underlying bonds. This is the case even though the CDS market is imperfect and non-transparent and quotes differ significantly in the market. It is nonetheless used as a reference.

Mugur Isărescu: Overcoming economic problems, the experiences of Sweden and Turkey – an inspiration for Romania? Opening speech by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the conference “Overcoming economic problems, the experiences of Sweden and Turkey – an inspiration for Romania?”, Bucharest, 23 September 2013. *  *  *  Ladies and Gentlemen, Your Excellences, Distinguished Guests It is a pleasure for me to welcome you to the National Bank of Romania. I salute the presence of such a distinguished audience: Their Excellences, the Ambassadors of Sweden, Turkey, Brazil, Cyprus, Germany, the Netherlands, members of the diplomatic corps, economists, bankers, businessmen, journalists. We are honored to host this international conference: “Overcoming economic problems, the experiences of Sweden and Turkey: are these an inspiration for Romania?” The title is, I believe, self-explanatory. In today’s globalized world, learning from other countries’ experience is of utmost importance. And while it might be true that no one really learns but from his own mistakes, one can hope that some other mistakes may be avoided when learning from other people’s experiences. Why Sweden and Turkey? Before answering this question I wish to emphasize that the National Bank of Romania is open and willing to host other conferences with similar topics. And today’s conference might be considered the first of a series, involving clusters of countries with relevant interactions.
The banks need to compile a reliable database for all operational risks that have arisen in the past 5 years or so and assess losses recorded during the period. It is only then one can simulate and assess how much capital should be allocated if a similar operational risk were to take place. Stress testing therefore is not only an add-on, but also a cushion for management of risks in terms of validation and allocation of capital and it is one of the highly accepted and commonly used tools. VIII. Cross-border transferability issues  This is relevant to both supervisors and banks where home and host supervisors require to agree on a common approach. Do banks which have global operations adequately take into account legal issues, capital issues and assumptions about liquidity or capital transferability? How well are local managers able to respond to host supervisory concerns? Currently, there is no sufficient data or experience to deal with these issues. All know there are legal issues in transferring capital on cross-border basis which are relevant to banks which have assets linked internationally. IX. Compliance by financial conglomerates  Generally, a financial conglomerate is defined in terms of combined activities, such as banking, securities and insurance. To what extent the financial conglomerate would use regulatory arbitrage and not adequately assess the systemic problems is a key element under Basel II?

This level is 1 pp of GDP higher than the average volume of this type of investment during the crisis. In any event, foreign direct investment in Spain was impacted to a lesser extent than portfolio investment during the recession, with no divestment recorded in any year, in contrast to what occurred with portfolio investment. That reveals its greater stability compared with other forms of international investment. Another notable characteristic of the recent trend of this item is the decline in the relative weight of these capital inflows in the form of debt liabilities – which comprise intra-group loans and have scarcely accounted for 12% of the total since 2013, compared with over 30% during the pre-crisis years (average between 1999 and 2007) – and the increase in investment in the form of equity. Thus, while in recent years the volume of foreign direct investment has, in terms of GDP, been around 1.5 pp below that observed during the pre-crisis expansion, its composition is sounder, since it is less vulnerable to adverse shocks. Challenges The future outlook for the foreign sector will be influenced by protectionist tensions and by the uncertainty still surrounding the final shape of EU-United Kingdom relations in the wake of Brexit. On the evidence available, the protectionist tensions between the United States and China may be expected to affect global trade flows in two ways: on one hand, a notable direct impact via the global value chains; and on the other, indirect adverse repercussions via their effects on global confidence and investment.
The natural resources sector reduced its annual growth rate by more than two points compared with the previous quarter, primarily related to lower mine production early in the quarter, but also to the significant drop in fishery. Sectors other than natural resources performed below trend in the second quarter. Growth was mainly driven by trade and construction, while other areas linked to investment slowed. Installed capacity utilization has declined accordingly. Domestic demand slowed down further in the second quarter. Final demand, however, which excludes inventories, continued to grow at the same pace of the first quarter. Gross fixed capital formation posted y-o-y expansion flat from the first quarter of this year, but below the figures of the second half of 2012. As has been noted before, this slowdown owes mainly to the maturing of mining investments after three years largely outperforming GDP. Also in an external context where the copper price has dropped and moderating expectations for growth around the world but especially in China, which call for more caution when evaluating investment decisions. On the other hand, private consumption was more dynamic, especially in its non-durable component, while durables remained high. Labor market conditions have continued to tighten, but are still the main driver of this component. Nominal and real wages have moderated their annual variation, while the unemployment rate remains near all-time lows. Again, unlike previous cycles, credit growth has accompanied private income, but has not been the main determinant of household spending.

As a country we have worked for years in strengthening a solid institutional framework with an economic policy scheme based on inflation targeting and a floating exchange rate, with a fiscal rule, a well regulated and supervised financial system, and trade and financial openness. As we have said on other occasions, our scheme of inflation targeting and floating exchange rate allows us to better cope with fluctuations in international markets. The float facilitates early and flexible adjustment of relative prices to changes in the external environment and prevents distortions in the decisions on external financing and exchange-rate hedging of companies and financial institutions in Chile. The recent depreciation of the peso is going in the right direction to help the economy to adjust. Furthermore, the credibility of the inflation targeting framework grants flexibility to the central bank to make changes to the monetary policy and the cost of credit if so required by the macroeconomic scenario, along with allowing adjustments to the nominal and real exchange rate. In order for us to grasp these benefits in times of shortage, we need to act consistently in times of abundance. We have often been confronted with social pressures to intervene the exchange rate market or lower the interest rate to prevent an appreciation of the peso, following the example of countries that are more active in this field.
So have the inputs, the thousands of air-miles and hours spent in meeting rooms and the outputs, the new global standards and rules, secured the outcome – a safer global financial system? This is the final question I will turn to. The inputs and the output have achieved more internationally than ever before. They are necessary conditions for success. But they are not in and of themselves sufficient. To achieve success, to make the international financial sector truly safe, this programme of reform needs to meet two further conditions. The first, and, wild difficult, the easier of the two, is the condition of coherence. The second, and harder, is the condition of mutual trust. I am often reminded by financial sector firms of the need for “coherence”. “How do all these reforms fit together?” “Given the interconnectedness of all things in the financial sector what about unintended consequences?” And, most pointedly, “when will this regulatory tsunami end?” I have sympathy for these concerns. Financial firms need to be able to plan. They do not have unlimited resources. They need to know as soon as possible the regulatory end point they are working towards. And it is true that some of the regulatory reforms overlap. Some address the same issue from different angles. We cannot be sure how they will work together in practice. But remember, neither was the crisis “coherent”. It threw up multiple and complex failures and problems that then sparked multiple regulatory responses.

These, and a willingness to put the spotlight on those that do not comply, are a cornerstone of the mutual trust we require. The FSB has also already begun to play a role in helping jurisdictions that have implemented standards in different ways come to a shared view on mutual recognition. The key is agreeing to focus on the outcomes achieved in different jurisdictions rather than a line by line comparison of respective rulebooks. The FSB will need to be increasingly active in this area as the implementation of the international reform programme progresses. The IMF has a key role to play through its Financial Stability Action Programmes for individual countries and its Spillover Reports on how, within the global financial system, actions and developments in one jurisdiction can affect others. And for the thorniest issue of all – resolving global systemically important banks and ensuring they are international in death as well as life, mutual trust has to be built on common standards and rules to ensure banks have debt that can be safely bailed-in in the right amount and location. To return to where I started: If we don’t hang together most assuredly, one way or another, we will hang separately. Since that first G20 leaders’ summit in November 2008 we have made much greater progress than ever before on agreeing and implementing international financial regulatory reforms. We can break the back of that work at the G20 in Brisbane this November.
Questions relating to the taxation system, corporate location and investment trends will be examined in this context. At the same time, it is clear that the weak exchange rate has periodically been of assistance during, for instance, the latter part of the 1990s, when strong export growth was able to compensate for weak domestic demand. However, there is also another side to this issue. An excessively weak krona is not good for the Swedish people’s standard of living. A few words about the Riksbank During the hearings at the Committee on Finance I do not usually speak of developments within the Riksbank. Today I intend to make an exception and report some developments to you, our owners. In the mid-1990s we who formed the management of the Riksbank, my predecessor Urban Bäckström, my successor Stefan Ingves and myself, set a course for the organisation based on a few fairly simple principles. We would endeavour to concentrate on the Bank’s core tasks; monetary policy and  2/7  financial stability. The emphasis would be on building up increased analytical capacity and competence within these areas. In addition, we would aim for greater openness, both internally and externally. These have been the guiding principles for our work over the past ten years. The changes that have been made are quite substantial. The number of employees at the Riksbank, including the Bank’s subsidiaries, has been reduced from over 1,200 to just over 400, which makes us one of the smallest central banks in Europe.

During the mid and late 1990s we did not cut the repo rate as much as our normal principles might have recommended, as our assessment was that some of the fall in prices was due to our own interest rate cuts, which subdued the housing cost component of CPI, and to deregulation that was partly of a temporary nature. In the same way, we did not react as much as we could have done when inflation rose sharply for transient reasons in 2001 and 2003. A more recent example is the decision in March 2005 not to cut the key rate. Our reasoning then was that it might have been possible with the inflation forecasts we had, but that the expected high growth, combined with elevated house prices, called for some caution. Our flexibility can also be said to include a preparedness to react to events where the final consequences are particularly difficult to survey. One such example is the acts of terrorism in the United States on 11 September 2001. In the wake of these attacks, many central banks around the world were quick to cut interest rates. This powerful response can be interpreted as a kind of "insurance" against a really poor outcome, rather than as the result of carefully-considered assessments of the most probable outcome. It would be desirable, for a better understanding of monetary policy, to develop the principles governing how our reasoning in practice weighs future inflation against real or financial stability.