samchain/econo-pairs-v1 huggingface dataset:
Bruno Gehrig: Review of the Swiss economy Introductory remarks by Prof Bruno Gehrig, Vice-Chairman of the Governing Board of the Swiss National Bank, at the half-yearly media news conference, Geneva, 14 June 2002. *  *  *  Developments in the financial markets From a Swiss vantage point, the situation on the financial markets in the first half of 2002 was predominantly influenced by the exchange rate development of the Swiss franc. The appreciation against the euro, which set in after 11 September 2001, has been arrested but has failed to bring about a sustained correction of the exchange rate. Moreover, the US dollar, too, has declined since April. At the beginning of June, it had fallen to its lowest level against the Swiss franc in two-and-a-half years. There are several reasons for the decline of the US dollar – by approximately 7% against the euro and the Swiss franc since the end of March, by approximately 6% vis-à-vis the yen – : imponderables of global political significance, growing doubts concerning a sustained upswing in the United States and – exacerbated by the collapse of Enron – the scepticism of investors with respect to the future development of yields. The record US current account deficit is increasingly being financed by means of short-term capital flows from abroad, which, by their very nature, are volatile. Against this background, high-risk investments generally showed a weaker trend. Equity markets and the US dollar lost in value while the gold price, bonds and the Swiss franc moved up.

Among the currencies (graph 1), the US dollar and the euro predominate with shares of 42% and 46% respectively. The maturities of the investments extend over the entire interest rate curve, with the average maturity being around five years. In the debtor categories, government paper predominates, accounting for a share of more than 50%. The rest comprises claims against international organisations and banks or bank-like borrowers with an above-average rating. Aside from these traditional bonds, US mortgage-backed securities were introduced in 2000, a new investment category which represents an ideal addition to the portfolio. In the context of the primary requirements specific to a central bank – extremely high liquidity, investment focus on the major currencies US dollar and euro, a mainly passive investment style – risk/return considerations are of prime concern. The goal is to achieve the highest possible return by means of all available concepts and techniques of modern asset management with adequate risk control. The investment strategy is developed by inhouse investment specialists. It is mostly implemented internally by a team of eight portfolio managers. We resort to external asset managers for the investment of approximately Sfr 4 billion (global bonds and mortgage-backed securities). Our entire investment activity is systematically monitored by risk specialists. In 2001, a yield of 5.2% was achieved on foreign exchange reserves. The average yield in the past four years was 6.3%.
Levels of savings If we follow the consumption smoothing theory, individual savings behavior is driven by the life-cycle: individuals tend to increase their savings as they earn more and then decrease their savings until they actually become negative when they retire and earn less, thus leading to a hump-shaped pattern for their accumulated wealth. Consequently, as the proportion of the aged population increases, private savings, as a proportion of income, should decrease. However, this decline may be gradual with the negative impact of ageing on the levels of savings prevailing in the longer run. Structure of savings In terms of structure, the fact that elderly people account for an increasing share of the population could change savings habits and have an impact on the demand for certain classes of assets. In particular, given that elderly people are more risk adverse, this could increase the already high demand for low-risk assets. Investment The standard production function exhibits two productive inputs: labour and capital. If the labour force tends to decrease or decelerate because of demography, then the production process may become more capital intensive, leading to a fall in the productivity of new capital and, in theory, a decline in the rate of capital return. Investment could be less dynamic and negatively impact potential growth. This would in turn have an adverse impact on the real interest rate, so that domestic savings and investments would balance.

I must stress here that France has a specific advantage: its population is expected to keep on growing fast for some decades thanks to a relatively high fertility rate and a dynamic migration policy; while our German neighbours for instance are on a decreasing trend. Overall, based on European Commission projection trends, we estimate that the expected decline of 1.5% in the working age population in the European Union between 2010 and 2020 could take 1 percentage point off its potential output. But there are ways to offset this evolution. A rise in the participation rates of the young, seniors and women is one of them. Pension and labour market reforms implemented in Europe are certainly a step in the right direction and should be further pursued. BIS central bankers’ speeches  1  Provided that the necessary reforms are implemented and that some changes in working habits are made, we expect that the euro area will be able to cope reasonably well with the expected fall in the population and working age population over the long run, notably in terms of the potential growth rate. Nevertheless, ensuring that public spending dynamics remain sustainable in the face of population ageing will continue to be a challenge, given the current debt situation in Europe. 2. Impact on savings and investment  How are savings likely to evolve, both in terms of levels and structure?
Together with staff from the Secretariat of the Basel Committee on Banking Supervision and its member agencies, they have selected timely topics, invited speakers who have sparked our discussions, and encouraged informed public discussion and debate on these matters. At this half-way point on the conference agenda, I would like to take a few minutes to share with you the very good news that the Basel Committee reported last week on Basel II. I’d also like to add some thoughts from my perspective on the some of the issues you are discussing and especially their relevance to the new international capital framework. II. Summary of 12 May 2004 press release  As you will probably know, the full Committee met just last Tuesday, actually in a conference room not far from the auditorium where you are meeting. Tuesday’s meeting may have been one of the most historic for the Basel Committee. Three results make this meeting especially significant in my view. First, and most important, we achieved consensus on the remaining outstanding issues that we faced in our efforts to revise the international capital framework.

A dedicated high court of common law has been assigned to adjudicate Islamic finance cases more expeditiously, giving due recognition on issues surrounding Shariah. For a complete dispute resolution on Islamic finance, the Kuala Lumpur Regional Centre for Arbitration (or KLRCA) has introduced the i-Arbitration Rules. The first of its kind, the rules incorporate a reference procedure to a Shariah Advisory Council or Shariah expert for professional opinions whenever the arbitral tribunal has to form an opinion on a point related to Shariah principles. Thirdly, is to develop a strong governance framework for Islamic financial institutions. We introduced a dedicated governance framework in 2010 that outlined the requirement for the Shariah governance structures, processes and arrangements to ensure that all the operations and business activities are in accordance with Shariah. This framework ensures that talent in lead arranging of sukuk, among others, have the expertise and Shariah knowledge to ensure that the sukuk structures are in compliant with the necessary rules and principles. Areas of collaboration between Hong Kong and Malaysia There are a few areas where Hong Kong and Malaysia can collaborate for mutual benefit. Firstly, is to have both Hong Kong and Malaysian expertise to work together in the quest to launch the first sukuk out of Hong Kong. We look forward to sharing our Islamic finance marketplace with Hong Kong in terms of expertise in structuring, managing and distributing the sukuk, as well as providing advice on legal and Shariah matters.
Other objections raised were the absence of instruments to respond to any asymmetric shocks, and the European economies’ lack of flexibility and real mobility in the labour force. The conclusion was that the euro would never exist! The facts have disproved this conclusion. But the very same arguments are sometimes deployed to suggest that the euro-area economy contains some inconsistencies that could endanger its prosperity. What can we say, from an economic standpoint, on this very important question? Firstly, that monetary union per se, and wherever it takes place, does not necessarily imply that, at any given point in time, all the participating countries will experience the same rate of inflation or of growth, even though the move to the euro was based on the successful completion of a convergence process. Let us focus, for example, on inflation. Present differentials do not appear to be very large, in comparison with the experience of the United States, a long-established monetary union of comparable size. Data on major cities of the US shows that inflation differentials have been at times very substantial, with divergences of 7 percentage points being recorded in the early 1980s. In the euro area, long-term convergence to a common level of prices gives naturally rise to differences in inflation rates across EMU countries. The convergence of productivity and living standards creates a trend towards price convergence, as a consequence of the commonly known Balassa-Samuelson effect.

The increased globalisation of Islamic finance and its greater integration with the international financial system increases the exposure of the system to contagion effect from such developments. In the dynamics of a financial crisis in the conventional financial system, this would be referred to as the second round effects. The first round effects is when developments within the financial system triggers the financial crisis which in turn impacts the real economy. The second round effects is when the resulting slower growth causes further strain to the financial sector. The experience has shown that when such crisis is not contained, the consequent deterioration in economic conditions results in a worsening of the financial crisis. For this reason, resolution has to take place quickly. For Malaysia, in the 1997-98 crisis, every effort was taken to give attention to financial sector resolution so as to prevent the spiral that could have set in as economic activity became affected by the financial crisis. In this indirect manner, Islamic finance would be affected by such financial turmoil. Slower economic growth and the reduction in the global liquidity would affect those institutions that are heavily reliant on a business model that focuses on real estate and asset finance. Islamic financial institutions would also be exposed to increased inventory risk due to the increased volatility and the reduction in asset prices.
My main conclusion is that there is no optimal solution for all cases; it depends on the circumstances in the individual country at the present moment. Ensuring operational independence, accountability and transparency for the supervisory agencies are more important than how they are structured. If your country has a well functioning banking supervision do not change its structure until you have clear arguments to do so. Do not make structural changes when the financial sector is weak or recovering from a crisis. On the other hand, developments in your financial sector such as an increasing role for other institutions than banks, argue for closer ties between the supervisory agencies. There are two basic issues in the discussion on the organisation of supervision: •  Should supervision be inside or outside the NCB and the Ministries? •  Should supervision of different sectors be unified in the same authority? These questions will be discussed later in my presentation. Let me first describe some of the present practices in organising supervision. Present practices Currently there is a great diversity of supervisory structures but the majority comes under one of the two main streams: The first is the traditional one with bank supervision in the NCB and securities supervision in an independent standalone authority. Insurance supervision is in many countries also located in a separate authority, but in other cases it is a department of the Ministry of Commerce or some other ministry.

As an example, it is more difficult to propose needed regulatory measures at the same time as promoting the growth of the financial market. To sum up: A country should be able to manage independence, accountability, transparency and efficiency satisfactorily in any kind of supervisory structure. For independence there might be some advantage with central bank supervision. But for cooperation leading to better efficiency there might be a slight advantage with a unified authority. Arguments for and against various supervisory structures After having discussed the conditions for good supervision let me now review some of the arguments for and against the various actual supervisory structures. I will first address the issues of having supervision inside or outside the ministries and the central banks. I will then turn to the arguments for and against unified authorities. Supervision inside ministries may provide some benefits in the form of insight and staff expertise, maybe also access to resources. But there is a strong disadvantage in the lack of independence plus the risk to the public’s confidence in the government if failures should occur in the supervised sector. There is also a serious governance issue in those countries where the government is the owner of financial institutions and also supervises them. Arguments for retaining supervision in the NCB What about supervision inside the NCB? First, banks have a special importance in the financial system. Their activities are often complex. Therefore, they need high quality, resource-intensive supervision. The NCB normally has independence and revenues.
•  The asset quality in the month under review was satisfactory, with the level of interest earning assets accounting for 77% of total assets compared to 76% for the preceding month. •  The sector’s income before tax amounted to K48,206 million compared to K23,897 million recorded in January. The 100% increase in profit before tax was mainly on account of the following: interest income, which increased by K58,497 million or 93% compared to K11,813 million or 82% increase in interest expenses. Additionally, foreign exchange income in gains and commissions increased by 100% from K30,291 million to K60,857 million. Non-interest expenses increased to K 104,869 million compared to K52,916 million in January 2004. However, the ratio of non-interest expenses to total net income remained at 69%. •  The banking sector’s liquidity position was satisfactory with the liquidity ratio (liquid assets to total deposits and short-term liabilities) remaining constant at 75%. All banks met the prudential minimum ratio of 50%. The deposit concentration at 28% from 31% in January was also well spread. Total deposits to total assets dropped to 71% from 73% in January. Money laundering draft directives •  On 18 March 2004, the BoZ held a consultative workshop with financial institutions, to discuss the draft Money Laundering Directives. Valuable contributions to clarify or strengthen the draft Directives at this well attended workshop were received. The BoZ is now in the process of finalising the said directives.

Preliminary indications are that the majority of the banks were ready for the installation of the RTGS application software on 29 March 2004. The installation of the software is being done in a phased manner, i.e. on first-ready-first installed basis. This is to ensure that the project schedule is not held back unnecessarily. •  It is also important to remind all banks that every bank is required to comply with the minimum technical infrastructure specifications for both the Perago RTGS client configuration and SWIFT connectivity prior to the installation of the application software. This will enable timely installation of the Perago RTGS application software, bilateral key exchange (BKE) for SWIFT connectivity and commencement of the pilot project. RTGS training for commercial bank staff •  The RTGS training facilities have been installed, tested and are currently running in the Bank of Zambia In-Service Training Centre. Training for the Bank of Zambia staff has been finalised. Training for commercial bank staff is scheduled to commence on 16 April 2004. This training will involve Perago RTGS Server Applications Technical Operations Training for  6  BIS Review 27/2004  the IT area staff and Perago RTGS Entry training for the business area staff. This programme covers training for transaction capturers, authorisers, and systems administrators and operators. •  As earlier communicated to commercial banks, a number of training sessions have been devised because the training facilities can only accommodate 12 participants at a time.
Boris Vujčić: Challenges for policy responses within the European Union in the context of post-crisis reconstruction Keynote speech by Mr Boris Vujčić, Governor of the Croatian National Bank, at the international conference “Economic and Financial Cycle Spillovers: Reconsidering Domestic and Cross Border Channels and Policy Responses”, organized by the National Bank of the Republic of Macedonia, Skopje, 7–8 April 2016. *  *  *  I would like to thank Saša Cerovac and Ivana Herceg for their help in preparing these remarks. Dear Ladies and Gentlemen, I am truly honoured to be invited as a keynote speaker at this conference that gathers central bankers and policy makers in the region to discuss issues raised by the heightened levels of distress and volatility in financial markets. With two episodes of severe distress behind us, the global financial crisis, followed by the euro-area crisis, many observers share a conviction that today we might be observing the seeds of a new similar incident waiting to happen. Some point to possible bubbles in asset markets, some to distorted business models in (parts of) the financial industry, and quite a few of them see a new crisis lurking behind emerging market developments, which may start the latest episode of a “ crisis trilogy”, as recently pointed out by Andrew Haldane from the Bank of England 1. To circumvent the reoccurrence of a lengthy and costly crisis, we need to improve our understanding of the processes underlying crisis episodes and adjust our policies accordingly.

For those who take the view that asset bubbles cannot be identified with certainty, it is neither appropriate nor necessary for the government to take action to burst them. Support for this view comes from the stock market crash in 1987 and the collapse of the IT bubble in 2000. In both cases, central banks were able to stabilise the financial market rapidly by aggressively cutting interest rates and injecting large amounts of liquidity into the market, and the economy and employment quickly resumed their upward paths. But the situation may be very different this time. Because the property and financial markets were closely inter-locked, risks were dispersed by the bundling of sub-prime securities and other financial derivatives, and a large bubble formed. The bursting of this bubble caused great damage to the European and US economies and people in Europe and America have had to pay an unprecedented price. The US government used $ billion to bail out banks and car manufacturers, and the UK government spent GBP 76 billion on rescuing the Royal Bank of Scotland and Lloyds Bank alone. Many European governments have also bailed out their banking systems, including the injection of capital into large banks by the Dutch and Belgian governments. 6. Based on experience in Asia in the past two decades, I believe asset-price bubbles, rather than inflation, pose the greatest risk to financial stability. My reasons for thinking this are many and complex, and we may discuss them on another occasion.
COVID-19 provides a chance to build a greener economy. It is a chance to break the vicious circle of weakening entrepreneurship and the slow diffusion of new and green technologies that have held back productivity growth and prosperity in Europe for too long. And it is a chance to build a deeper and greener financial market that reduces the costs of transitioning towards a low-carbon economy. The ECB will be no bystander on this journey. As climate change poses severe risks to price stability, central banks are required, within their traditional mandates, to strengthen their efforts to support a faster transition towards a more sustainable economy. Thank you. [1] See Le Quéré et al. (2020), “Temporary reduction in daily global CO emissions during the COVID-19 forced confinement”, Nature 2 Climate Change, 18 May 2020. [2] See UN Environment Programme (2019), Emissions Gap Report 2019. For the 2% goal, the respective number would be 2.7%, which is still very large. [3] See Carney, M. (2015), “Breaking the tragedy of the horizon – climate change and financial stability”, speech at Lloyd’s of London, London, 29 September. [4] See Samset et al. (20200), “Delayed emergence of a global temperature response after emission mitigation”, Nature Communications, 11. [5] See Bayer, P. and M. Aklin (2020), “The European Union Emissions Trading System reduced CO emissions despite low prices”, 2 Proceedings of the National Academy of Sciences of the United States of America. [6] See Bravo-Biosca et al. (2016), “What drives the dynamics of business growth?”, Economic Policy, Vol. 31(88), pp.

Meanwhile, on the supply-side of the economy, there is little evidence as yet in the productivity data that would suggest an acceleration in the underlying rate of capacity output growth such as we have seen in the US, and which, while it lasted, would allow the economy to grow correspondingly faster without necessarily generating inflationary pressure. We might all fervently hope to become infected by that particular disease - but the actual evidence so far suggests that up to now we have remained immune. That does not necessarily mean that we will not see accelerating productivity growth. But we can’t afford to gamble on that happening either. When people approach me with the sound-bite “give 3  BIS Review 18/2000  growth a chance”, what I hear them saying is “take a risk with inflation”. But equally when they say “you must take no risks with inflation”, I hear them saying “the world will never change”. The truth is that nobody knows with any great confidence. The important thing is to keep an open mind and to monitor intensively all of the data as they becomes available to us, and then draw what inferences we can as to how those data affect the balance of risks around the inflation target looking ahead. And that of course is precisely what we do in the Monetary Policy Committee.