samchain/econo-pairs-v1 huggingface dataset:
Jarle Bergo: Monetary policy and its role in economic policy Address by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at the Confederation of Vocational Unions, Oslo, 7 February 2003. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 22 January and on previous speeches. Please note that the text below may differ slightly from the actual presentation. *  *  *  The objective of monetary policy is to ensure nominal stability. There were wide fluctuations in the Norwegian economy in the 1970s and 1980s. Economic developments were marked by high and variable inflation. Inflation accelerated in the beginning of the 1980s and it took a long time before it fell. The absence of a nominal anchor was one of the main reasons behind these pronounced swings in the Norwegian economy. With a policy of low interest rates and devaluations, inflation took root. Nominal interest rates were kept at a low level even though inflation and the value of tax-deductible interest expenditure rose. Frequent devaluations from 1976 were not able to prevent a decline in the manufacturing sector. On the contrary, they proved to be self-reinforcing. The wide fluctuations culminated in a credit boom in the mid-1980s, followed by a deep recession and high unemployment towards the end of the 1980s.

The high level of wage  1  See box in Inflation Report 2000/4: Effects of an interest rate change. 2  See box in Inflation Report 2002/2: How does the krone exchange rate influence the CPI. growth fuelled expectations of continued high interest rates in Norway relative to other countries and appears to have contributed to the appreciation of the krone. The unexpected high level of wage growth required a tight monetary stance. Norges Bank increased its key rate last summer. The interest rate differential against trading partners widened and the krone appreciated. This appreciation also reflected other factors, such as uncertainty in stock markets and higher demand for NOK-denominated assets, which were perceived as a safe investment in an otherwise turbulent period. In the long run, wages must be commensurate with the value added that is generated by workers. Real wage growth is thus determined over time by developments in labour productivity in all sectors of the economy. If historical productivity growth trends persist, the long-term rate of growth in labour costs that is compatible with the inflation target is 4½%. The outcome of the wage settlements we have observed in recent years is not consistent with this. If monetary policy is to have an impact, it is important that wage growth responds to labour market tightness. Since the mid-1980s, wage growth has been markedly higher in Norway than among trading partners.
Friedman, Milton, and Anna Jacobson Schwartz, 1971, A Monetary History of the United States, 1867–1960, Princeton, NJ: Princeton University Press. BIS central bankers’ speeches  7

The growth rate of the financial sector, while stellar in Q1, will be much slower through the rest of the year, because underlying economic activity will be weak. But in terms of being able to function and operate amid the circuit breaker, the financial sector’s performance has been quite heartening. Foreign Exchange Trading Many of you are from the foreign exchange and treasury business. FX and treasury has been one of the better performing segments in the financial industry. Singapore’s FX market has been resilient – it was able to manage the volatility from the global impact of COVID-19. FX trading volumes in March hit a record high because people were hedging, offloading, and readjusting their investment positions. Activity has now come down to a more normal level. Spreads have widened. This is to be expected in times like these. But spreads have not widened unduly. There is sufficient liquidity in the system. Having a robust infrastructure in place to support swings in trading activities has been important. 1/3  BIS central bankers' speeches  Especially useful was the electronic trading infrastructure for FX, which MAS has been working with industry on for the last few years. We want the pricing and matching engines to be based here, and not have to wait for prices to be matched in London, New York, or Tokyo, because there is still a time lag taken to route orders to these markets. Sometimes there are execution errors with these lags, especially during periods of trading volatility.
Although wholesale funding plays an important role in market discipline, it is particularly sensitive to changes in perceptions about the risk of issuers and to the assets’ liquidity in the secondary market. In addition, the events of recent years show that negative developments in foreign or local financial conglomerates may adversely affect the cost of funds in the wholesale market for the banks belonging to these groups. Accordingly, it is important that banks maintain a diversified funding base in terms of counterparties and maturities. Also, banks should use in their liquidity management stress tests and contingency plans that appropriately reflect their risks, business strategies, financial condition and financing ability under different scenarios. In addition, it is important that banks properly internalize the economic and reputational risks of their exposure to related entities, for which a proper corporate governance framework is crucial. In this context, I would like to bring to your attention four regulatory elements. First, the Superintendence of Banks and Financial Institutions (SBIF) perfected its regulatory framework on corporate governance in banks. Second, based on the possible contagion effects in financial conglomerates the SBIF enhanced the regulations restricting transactions with related debtors, increasing their supervision tools in this area.

Figure 4  CPI inflation (*) (annual change, percent)  10  CPIEFE inflation (*) (annual change, percent)  10 10  10  8  8  8  8  6  6  6  6  4  4  4  4  2  2  2  2  0  0  0  0  -2  -2 -2  -2  -4  -4 -4  -4  07  09  11  13  15  07  Dec.2013 Report  09  11  13  15  Sep.2013 Report  (*) Gray area, as from the fourth quarter of 2013, shows forecast. Sources: Central Bank of Chile and National Statistics Institute (INE). 10  BIS central bankers’ speeches  Figure 5 MPR and expectations (percent) 9 8 7 6 5 4 3 2 1 0  9 8 7 6 5 4 3 2 1 0 07  08  09  10  11  12  13  14  15  MPR  FBS second half Nov. 2013  EES November 2013  Forward rate, Dec.2013 Report  Source: Central Bank of Chile. BIS central bankers’ speeches  11
to NFC chips in mobile phones and to the kernels for contactless payments in POS terminals, thus facilitating contactless payments with cards issued within national card schemes in the EU Member States; - Encouraging the use of electronic identity and solutions based on trust services, improvement of electronic identification and trust services with a view to meeting the requirements for strong customer authentication and other regulatory requirements; - Improved acceptance of digital payments by both the public and private sector, including by legislative amendments in 2022, if needed; - Standardisation of additional functionalities by establishing special SEPA schemes aimed at greater convenience in initiating instant payments, such as the services ‘request-topay’, payment by mobile phone number (proxy look-up), electronic invoice and electronic receipt, etc.

Further steps to digitise financial services in the EU The further development of digitisation will continue to be among the main priorities, and the following measures are expected to be taken in order to accelerate these processes and reach their full potential at European level: 4.1. Eliminate the fragmentation of the digital single market by: - Legislative changes aimed at creating opportunities for interoperable use of digital identity throughout the European Union. This will allow easy ‘onboarding’ of new customers entirely online, in full compliance with the requirements for combatting money laundering and terrorist financing; - Facilitating cross-border provision of financial services, including by introduction of a harmonised regime for new activities such as crowdfunding, credit intermediation, and cryptocurrency services; 4.2. Adaptation of EU legislation to facilitate digital innovation: - Regulation of activities with cryptocurrencies and financial instruments based on tokens by introducing a comprehensive regulatory framework by 2024, allowing the implementation in the financial service sector of distributed ledger technology (DLT) and cryptocurrencies, taking into account the related risks;  3  - Promoting cooperation and use of cloud computing infrastructure, including through the development of a legislative framework for the supervision of information and communication technology (ICT) providers for the financial sector; - Promoting the use of artificial intelligence tools in the financial services sector; - Adherence to the principle of technology neutrality of legislation, combined with the issuance of interpretative guidelines on how existing legislation on financial services should be applied to new technologies in order to reduce legal uncertainty. - 4.3.
As Chart 5 illustrates, between 1995 and 1999 interest rates fell by between 3 and 6 percentage points in Ireland, Spain and Portugal. And in Greece between 1995 and 2001, interest rates fell by a remarkable 16 percentage points. Whether by coincidence or causality, what happened next in credit markets in these countries was dramatic. The credit gaps in each of Spain, Portugal, Ireland and Greece widened significantly and continued widening through the early part of this century (Chart 6). By 2008, these credit gaps stood at over 25 percentage points in Greece and Portugal, almost 40 percentage points in Spain and over 50 percentage points in Ireland. It is unlikely that any of these countries have previously seen credit booms on this scale. It is useful again to rerun history and ask how macro-prudential policy might have looked over this period. Charts 7 and 8 give the “Minsky rule” paths for bank capital ratios in Spain and Ireland relative to their actual paths. As in the US, they show macro-prudential policyimplied capital ratios lying significantly above their actual paths, by progressively larger amounts. At their peak, Minsky rule paths for bank capital are more than twice their actual levels in Spain and three times their actual level in Ireland. Macro-prudential stringency would have counteracted the loosening of monetary policy.

Such an exercise is essentially identical to the common practice of constructing Taylor rules for monetary policy, as in Chart 2. Chart 4 draws the macro-prudential policy-implied path of US bank capital ratios. In deference to the architect of modern theories of credit-induced instability, let us call this the “Minsky rule” [Minsky, 1986]. The path of the Minsky rule is, in many respects, the mirrorimage of the Taylor rule. It suggests that hypothetical US banks’ capital ratios would have been systemically and significantly tighter than their actual path between 2000 and 2009. In  2  BIS central bankers’ speeches  other words, a tight macro-prudential stance would have counteracted the effects of a loose monetary policy stance. Although it is impossible to know for certain, it seems plausible that having this extra degree of policy freedom would have helped stabilise the US economy and financial system. A tighter bank capital regime would have tended to slow pre-crisis credit growth, thus constraining the boom. And more capital in the US banking system would have helped protect the wider economy from the credit crunch that followed the bust. In short, the boombust cycles in US credit and GDP would have plausibly been somewhat less severe had US policy been ambidextrous. The euro-zone crisis As a second historical example, consider the behaviour of some euro-zone crisis countries. In the run-up to monetary union, monetary policy was loosened significantly in a number of the peripheral European countries whose interest rates converged on core euro-area countries.
Mario Draghi: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament Introductory statement by Mr Mario Draghi, President of the European Central Bank, for the Hearing at the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 17 November 2014. *  *  *  Mr Chairman, Honourable Members of the Economic and Monetary Affairs Committee, Ladies and Gentlemen, It is a pleasure for me to be back again in this committee for the last hearing of 2014. This year has once again been a year of profound change for the euro area and for the Union as a whole. It was a year of legislative and institutional progress on many fronts, as 2014 saw the birth of banking union with the agreement of the Single Resolution Mechanism, the start of the Single Supervisory Mechanism and the successful conclusion of the comprehensive assessment of banks’ balance sheets. And it was indeed a challenging year for monetary policy, which saw the ECB take a wide range of measures to respond to the risks emanating from an increasingly sobering economic outlook. You have chosen two topics for today’s hearing, the relationship of financial fragmentation and monetary policy as well as the Eurosystem’s collateral framework. I will touch on both these issues, but let me first run you through our current assessment of the economic outlook. Economic and monetary developments The euro area growth momentum has weakened over the summer months and most recent forecasts have been revised downwards.

At the same time, our expectation for a moderate recovery in 2015 and 2016 remains in place. Demand should be supported by a number of factors. Among them are our monetary policy measures and progress made in fiscal consolidation and structural reforms in some countries. At the same time, high unemployment, sizeable unutilised capacity, and the still ongoing and necessary balance sheet adjustments are likely to dampen the recovery. Risks to the economic outlook continue to be on the downside. In particular, the weakening in the euro area’s growth momentum, alongside heightened geopolitical risks, could dampen confidence and, in particular, private investment. In addition, insufficient progress in structural reforms in euro area countries constitutes a key downward risk to the economic outlook. Inflation in the euro area remains very low. In October, it stood at 0.4%. We expect it to remain at around current low levels over the coming months, before increasing gradually during 2015 and 2016. Looking forward, we closely monitor risks to price developments. The latest monetary data point to subdued underlying growth in broad money. Its annual growth rate has increased moderately over recent months. It appears that the turning point in credit growth is now behind us, and credit growth rates, while remaining negative, are gradually improving. Monetary policy and financial fragmentation Let me turn to financial fragmentation, the first topic you suggested for today’s hearing.
In particular, the Bank for International Settlements had maintained since the early 2000s that, in specific circumstances, central bank conduct in the face of severe risks to financial stability would have to be pre-emptive and not only reactive. Simply put, the damage wielded by a financial crisis might be so great that some price stability slippage in the present would be  BIS central bankers’ speeches  1  warranted in exchange for preventing a future, more serious deviation that might prove more difficult and costly to reverse. The Bank for International Settlements also asserted that the combination of a price stabilityoriented monetary policy and a merely micro-prudential supervisory policy did not ensure the stability of the financial system as a whole. In this connection a third tool was needed: a macro-prudential supervisory policy. While it is still too early to draw all the economic policy lessons arising from our experience of this crisis, I believe certain necessary changes can be discerned. Among these, the need to pursue macro-prudential policies is one of the most evident implications. Macro-prudential policy The crisis has demonstrated that the previous combination of monetary policy and microprudential policy is insufficient both for shoring up the stability of the financial system as a whole and for ensuring, in the event of crisis, that the impact on the real economy is limited. To achieve these goals a macro-prudential policy is also needed, and it must be equipped with new objectives and instruments.

There is already some agreement on the need to have this new macro-prudential policy rest on two levels or dimensions. First, a cross-sectional dimension, focused on controlling the distribution of risks within the financial system at each point in time. This requires analysis of how institutions interact and what are the consequences of these interactions for the system as a whole. The aim should be to identify those interactions of most global systemic significance in order to subject them, logically, to more demanding soundness requirements. Further, macro-prudential policy should also heed the time dimension, which analyses how aggregate risk evolves and how it interacts with the normal functioning of the real economy. This is the perspective needed in order to design, for example, measures to temper the procyclical tendencies inherent in the financial system. As is known, the Banco de España was a pioneer in this field when, in 2000, it introduced dynamic provisioning. In the initial stages of the crisis the potential of such a tool was evident; however, the subsequent heightening of the crisis also showed its limitations. The interactions between monetary and macro-prudential policy will pose complex challenges to central banks. Theoretically, monetary policy should continue focusing on maintaining price stability; and macro-prudential policy, on ensuring financial stability. In practice, however, action by each of them will inevitably exert a strong influence on the objectives of the other, and that has implications for the institutional design of the macroprudential authority.
Challenges arising from global policy spillovers Let me now turn to the challenges arising from the global policy spillovers, in particular to emerging economies. With cross-border inter-dependence and contagion being very much a phenomenon of this new environment, such global policy spillovers are rapidly transmitted to other parts of the world through economic and financial flows. While the repercussions of the global economic and financial disruptions have been well recognised, less discussed have been the consequences of the global policy spillovers. Significant and continuous spillovers have emanated from the wide-ranging policies in the advanced economies, including the unprecedented monetary easing, the fiscal stimulus then consolidation, the repair and resolution of the financial sector, the initiatives to reduce public and private sector indebtedness, and the consequences of the global regulatory reforms. The highly accommodative global monetary environment has generated higher global liquidity. While contributing to the resumption of credit flows, it has exacerbated the recent surges in capital inflows to emerging economies. These inflows have resulted in significant strengthening of currencies, rising asset prices, stronger credit growth, and for some, overheating conditions in the economy. These inflows have, however, been punctuated by reversals in capital flows, following deleveraging activities mainly by the banking groups in the crisis-affected countries. Deleveraging by sovereigns and by households, in particular the United States, have also reinforced this trend.

These frameworks, which have been put in place during the good times, are also being supported by ongoing work, in the area of building a consistent regulatory environment given the increasing presence of Asian banks in each others’ jurisdictions. This is reinforced by cooperation among national supervisors and in the development of arrangements for crossborder resolution. Regional platforms have been established for structured forums for the assessment of risks and vulnerabilities to the region, to increase the prospect for pre-emptive actions to be taken. Collaborative efforts are also ongoing in the area of building regional financial infrastructure, including the financial markets and payment systems to facilitate the efficient intermediation of financial resources in the region. Collaborative efforts are also accorded to the area of anti-money laundering, to ensure the integrity of the increasingly integrated financial systems in Asia. Finally, collaboration has also progressed in the area of capacity building, to strengthen the institutional capability of the central banks in the region to deal with the new challenges of the new environment. Finally, one of the most significant but often under-appreciated trends across most economies in these recent two decades, is the significant rise of inequality within economies. The economic crisis has worsened this trend given the conditions of high unemployment in many parts of the world. In many areas of policy-making, inequality is often not given explicit consideration.