samchain/econo-pairs-v1 huggingface dataset:
(2007) Committee on Global Financial System’s “Report on Financial Stability and Local Currency Bond Markets”  10  BIS Review 98/2008  Borio, C., C. Furfine, and P. Lowe (2001), “Procyclicality of the Financial System and Financial Stability: Issues and Policy Options”, BIS Papers No. 1, March 2001. Calvo, G. and C. Reinhart (1999), “Capital Flow Reversals, the Exchange Rate Debate, and Dollarization”, Finance and Development, Vol. 36 (September), pp. 13-15. Cecchetti, S., A. Flores-Lagunes, and S. Krause (2006), “Financial Development, Consumption Smoothing, and the Reduced Volatility of Real Growth,” AEA 2007 Conference Papers. Ghosh, S. (2006) “East Asian Finance: The Road to Robust Markets” World Bank Conference Edition, Conference on “ East Asian Financial Markets: The Next Frontiers” June 2006, Hong Kong. International Monetary Fund (2005), Independent Evaluation Report of The IMF’s Approach to Capital Account Liberalization, Washington D.C. ______, (2004), World Economic Outlook, April 2004, Washington D.C. OECD (2007), Going for Growth 2007, OECD, Paris. Kose, M., E. Prasad, and M. Terrones (2006), “How do trade and financial integration affect the relationship between growth and volatility?” Journal of International Economics, Vol. 69 pp. 176-202. ______, (2005), “Growth and Volatility in an Era of Globalization”, IMF Staff Papers, vol:52, 31-63. Kose, M., E. Prasad, K. Rogoff , and S. Wei (2006), “Financial Globalization: A Reappraisal”, IMF Working Paper 06/189, Washington D.C. Larrain, B. (2004), “Financial Development, Financial Constraints, and the Volatility of Industrial Output”, Federal Reserve Bank of Boston Public Policy Discussion Papers 04-06.

Stefan Ingves: Swedish experiences of monetary policy with an inflation target Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the Conference on Inflation Targeting, organised by Magyar Nemzeti Bank (the Central Bank of Hungary) at the Hungarian Academy of Sciences, Budapest, 19 January 2007. *  *  *  First and foremost, thank you for the invitation to come here! The theme of my talk here today has a "practical" leaning. I will talk about the Swedish experiences of conducting an inflation-targeting policy and how our monetary policy strategy has developed along the way. Conducting monetary policy is in many ways a learning process. The Swedish experiences of the past decade or so provide a concrete example of how such a process may look. The Riksbank is one of the central banks that conduct monetary policy with an explicit inflation target. This is a group that has grown considerably in recent years. The main reason for this is probably that the experiences of this policy have on the whole been very good. In fact, so good that it has become an interesting alternative even for economies that are already functioning well. However, this was not the case at the beginning of the 1990s, when Sweden changed over from a fixed exchange rate to inflation-targeting and a floating exchange rate. We were then in the middle of a deep economic crisis and a situation where it was necessary to reform the entire stabilization policy framework.
The way we conduct monetary policy has also changed over the past thirteen years. The inflation-targeting policy introduced in 1993 has of course always been the nucleus, but it has developed in various ways. Work in my particular field of interest, financial stability, has also been refined in many ways. For obvious reasons, this is an area that has come under particular focus in recent years. One might say that if the task of maintaining financial stability had previously tended to be overshadowed by the usually more attention-grabbing task of maintaining price stability, the situation has almost been reversed during the crisis. The financial stability work has in any case gained a more prominent position and become more on a par with monetary policy. Now I do not intend to devote my last speech as member of the Executive Board to outlining my central bank memoirs. I have always been more interested in looking ahead than looking back, and I intend to do so today. More specifically, I intend to take up some areas that I believe will feature in the discussions on central banks and their activities in the coming years. They are all connected with the financial crisis in one way or another; it is difficult to avoid it in this context. In brief, I will talk about two themes: The importance of indebtedness not becoming too high and the importance of having crisis management mechanisms in place before the event. The most important lesson: Don’t allow too much debt to build up!

Once employees are on board, performance management should play a greater role, both in compensation decision-making, which needs to be simplified and diversified, and in the promotion process. The process should reflect a better balance between production and controls, by focusing not on “what” was accomplished but “how” it was accomplished. Repercussions are necessary for employees that do not behave in a manner that is desirable. I said that leadership must come from the top. But that doesn’t mean that you can’t drive the culture from throughout the organization in the form of “culture carriers” – employees who are well connected, respected and can be effective in making your culture “go viral.” Cultural change is not just a “flavor of the month.” It is a long-term commitment to changing a firm and an industry. It will take time. And, once you feel you’ve achieved what you originally set out to achieve, you will likely have raised the bar and will need to reset your goals. Building and maintaining a strong culture in a firm is an ongoing effort, not a “one and done” initiative. 8  BIS central bankers’ speeches  Conclusion Will our list of “to dos” ever end? Probably not. Will our list of “worries” get shorter? Unlikely in the current environment. We live in an ever-changing environment where speed and agility are of the essence. Demands from customers change, expectations from shareholders change, and the regulatory landscape you work within will continue to evolve to keep pace.
Output has increased more rapidly than potential output for 2-3 years. Much of the available capacity has now been put to use. We estimate that capacity utilisation was approximately ½ per cent above normal at end-2005. Despite strong economic growth, inflation is still low. As the recovery became more broadly based, inflation gradually began to edge higher. In the second half of 2005, the 12-month rise in consumer prices adjusted for tax changes and excluding energy products (CPI-ATE) varied between 1 and 1½ per cent, before surprising on the downside in December and January. In February, inflation edged up again. Monthly variations in this measure of core inflation have been fairly pronounced recently. The trend in prices for consumer goods over the past two or three years is a result of favourable developments in the Norwegian and global economies. Low inflation is being accompanied by real income growth and a rise in production. In other words, low inflation is not the result of declining demand, activity or employment. Growth among our trading partners is still solid, and appears on the whole to be somewhat stronger than assumed a few months ago. High commodity prices have contributed to somewhat higher  BIS Review 30/2006  3  inflation, but so far underlying inflation has not been pushed up. Key rates remain low among many of our trading partners. Market participants expect a gradual increase in key rates in the period ahead, both in Sweden and the euro area.

However, it is important to remember that for each successful investor earning high returns, there are many others with the same ambition and risk willingness, but with a record of poorer performance and bankruptcies. The Government Pension Fund cannot run the risk of ending up among the worst performers. The globalisation of financial markets provides the Fund with good opportunities for investing and diversifying risk. However, we cannot insulate the Fund from wide annual swings in the value of the investments. We invest in international equity markets where prices fluctuate widely. These fluctuations are the reason why equity investments generate a higher return over time. The best year in the Fund’s history so far was 2003, when it posted a real return of 11 per cent. This stood in sharp contrast to the previous year’s result, which was -6 per cent. Globalization and cyclical developments have been kind to the Norwegian economy. Few countries are benefiting as much as Norway – and losing as little – in the current environment of freer trade in goods and services and cross-border labour mobility. Economic developments and prospects Let me now turn to the current economic situation and the outlook for the years ahead. Economic growth in Norway has generally been strong over the past 15 years, although with some cyclical variations. A clear upturn in the years from 1993 to 1998 was followed by a period of more moderate growth and a mild downturn in 2002 and into 2003. Wage developments reflect and influence business cycles.
But the dilemma goes further - given that it is rational for others to expand their budgets it becomes rational for your own country to do so too - even if your instinct is not to “free ride”. Otherwise you might rationally expect to end up among the small minority that does not expand and at the same time still have the tighter monetary policy that results from everyone else expanding. This is the classic “prisoner’s dilemma” from game theory. The conclusion is that it is necessary to have rules for fiscal policy that limit deficits and debt when monetary policy is united and fiscal policy divided, and that these rules need to be followed. But the conclusion is also that the pressure to over-expand is as strong during an upturn as during a downturn. In fact this is what we have seen in the euro zone during the heyday of the late 1990s - a much too expansionary fiscal stance in some euro zone countries, which led to tighter monetary policy and thus an incentive for others to weaken fiscal discipline. The euro zone then started the downturn with large deficits, considering the earlier boom, instead of surpluses. What the Pact then required, a 180-degree turnaround in fiscal policy to a tighter stance, reinforcing the downturn, was considered by some as stupid. In fact it was the lack of savings during the boom that was stupid.

Why not have all EU countries commit themselves to establishing independent bodies with the responsibility of enhancing transparency by conducting independent forecasts of the countries’ deficits and providing recommendations on a regular basis? They would have only an advisory role and their authority would stem from impartiality and expertise. The subject of their recommendations would be the overall fiscal stance - neither the specifics nor indeed the political orientation of fiscal policy. The Excessive Deficit Protocol (EDP) states that member states shall ensure that national procedures in the budgetary area enable them to meet their obligations. It would therefore be in the spirit of the EDP to have EU countries commit themselves to establishing these kinds of bodies. At the very least, these independent bodies would be able to make more reliable and unbiased forecasts as a basis for EU recommendations. Such an arrangement would avoid having unreliable deficit figures before elections, only to “discover” the real state of accounts after the vote - such as has been the case in Portugal, France, Germany, and most spectacularly in Greece recently. By having a similar role as the Congressional Budget Office in the US, the bodies would ensure a reliable and unbiased “reality check” in times of fiscal profligacy.
We observe a downward trend of productivity growth – which is considered by some as “secular”, jumping perhaps too hastily to a very long-term conclusion. Furthermore, the ageing of the population means the labour supply is shrinking and potential growth is falling. Thanks to Japan’s G20 Presidency, the challenges posed by demographics are now on the agenda. The ECB’s monetary policy has played an important role in supporting the recovery of the euro area: estimates put the cumulated impact on growth at around 2.5 pp and on inflation at between 1 and 1.5 pp for the period 2014–181. In addition, 11 million jobs have been created since 2013. In September, the ECB introduced a further package of measures. Although it has received less attention, the most innovative part of this package is the strengthening of the state-dependent forward guidance on interest rates. Conditional on inflation developments, this will act as an automatic stabilizer through adjustments in the yield curve and financial conditions. In other words: what does matter is not only the level of our key short term interest rates, which are currently anticipated by markets, reasonably in my view, as close to bottoming out ; it is also and foremost the time horizon of our policy measures Clearly, monetary policy will be all the more effective if it will no longer be the only game in town. You may not realise it, but the euro area has more policy room than others in non-monetary domains, but under-uses it.

François Villeroy de Galhau: Digital innovation - what role can we play as central banks? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Singapore Fintech Festival, 8 November 2021. * * * Ladies and Gentlemen, It is always a great pleasure for me to have the opportunity to speak at the Singapore Fintech Festival, and I wish to thank Ravi Menon and the Monetary Authority of Singapore for organizing it. Although I am joining from Paris today, I look forward to coming back to Singapore soon to continue exchanging. Innovation may not be the first thing that comes to mind about central banks. After all, our institutions have been around for quite some time: MAS just turned 50 – and I take this opportunity to congratulate this golden Jubilee –, and Banque de France is more than 2 centuries old. We are more associated with stability than disruption… Yet the blossoming of digital innovation has the potential to transform the financial system in its entirety. We have to embrace these changes, but there are also things that we need to preserve in this process: the stability of the financial system. Innovation and stability can appear as contradictory in the short run; but they are complementary through a common value; a keystone: trust. Trust of the public in money. To be implemented effectively, these dual principles of innovation and stability require a cooperative setting.
Banks entered the crisis from a position of strength and have been a source of stability and support for individuals and businesses throughout the crisis. MAS’ concerns at the onset of the crisis that defaults among weaker corporates could strain banks’ profitability and capital positions have not materialised. The domestic systemically important banks have started the year with strong capital positions. In fact, their aggregate CET1 ratio has held firm, at 14.7% in the first quarter of 2021 compared to 14.4% prior to the onset of COVID-19. Although default rates have seen a slight uptick, the banking system’s non-performing loan ratio has remained largely stable at around 2.4% as at Q1 this year. MAS recognises however that problem loans can take time to surface. Borrowers on full or partial loan moratoriums may not show signs of financial stress, especially if they are also obtaining financial support from the government. As support measures taper off, banks will have greater clarity about the repayment ability of their borrowers. It is good that our banks have set aside provisions against potential bad debts. MAS is conducting additional stress tests to assess whether it is necessary to extend the current dividend restrictions on local banks and finance companies. CYBER RESILIENCE Cyber risk remains one of the top risks which MAS is tracking closely. The incidence, scale, and complexity of cyber-attacks continue to mount. Recent attacks on major organisations globally such as Colonial Pipeline, Microsoft and Accellion, are strong reminders that the fallout from a cyber attack can be far-reaching.

The past two years have shown that the work of central banks and industry in partnership, at a global level, is productive in developing and supporting best practices. As such, while both the FXWG and MPG have fulfilled their mandate to develop the Code, this spirit of central bank-industry partnership will be maintained, as will the Code itself, in the future by the newly formalized GFXC. The GFXC reflects a significant expansion of cross-border and public-private sector efforts. It is a forum that brings together central banks and market participants via the FXCs—currently representing sixteen regions—to encourage collaboration and communication on FX-related issues, to exchange views on trends and developments in the FX market, and to promote and maintain the FX Global Code. In addition, the work to develop the Code has led to the development of central bank-sponsored FXCs in new regions, some of which have already launched and others that are forthcoming. FXCs, including the one sponsored by the New York Fed, will play important roles both within their own region and in their global engagement via the GFXC. One of the key objectives of the GFXC is to keep abreast of the evolution of the market, and work to ensure that the Code’s principles remain relevant. One area of evolution is electronic trading. Before concluding, I want to spend some time discussing the GFXC’s request for feedback on 4/6  BIS central bankers' speeches  particular aspects related to the use of last look in electronic FX trading.
Therefore, as you celebrate this great milestone, we join you in anticipating further progress and effectiveness in the execution of your mandate. Mr. Chairman, the central theme of my address today is the important role that information plays in economics in general and in financial markets in particular. In 1970, some 39 years ago, or 4 years before the establishment of the Central Bank of Swaziland, an economist called George Akerlof published a paper called “The Market for Lemons.” By lemons he was referring to used cars in the United States of America. Akerlof, who would later win the Nobel Prize in Economics for his work, demonstrated how information asymmetries between two contracting parties, a used car seller and a used car buyer, could lead to an inability of the car dealer to sell cars. More broadly, the moral of his story was that information asymmetries that allowed for no credible assessment of value of a given transaction, could lead to market collapse – in this instance the market for used cars. Mr. Chairman, if we fast forward to the year 2008, and to the current financial crisis, we note that asymmetries in information between financial institutions, this time relating to the extent of exposure to and value of complex derivative products, led to a freezing up of credit markets, the eventual collapse of some important financial institutions, and the near meltdown of the entire financial system. In these events we can see the insights of Akerlof in his 1970 paper.

Developments beyond the forecast horizon The uncertainty in the forecasts increases the further ahead they look, but despite this it can be interesting to look beyond the two-year forecast horizon in the main scenario. Economic developments during the past decade have been characterised by considerable free resources following the crisis at the end of the 1990s. That is not the case today, and will be even less the case in two years’ time, if the economic upturn continues as expected. This changes the focus of economic policy. A decisive factor for economic growth will be the development of production capacity, as I have mentioned earlier. It is production capacity that governs the development in demand that is compatible with price stability. Here there are some worrying tendencies, which I have touched upon earlier. The labour supply in Sweden risks developing less favourably beyond the forecast horizon as a result of demographical changes. Shorter working hours would have the same effect. On the other hand, measures may be taken to increase the supply of labour and thereby affect developments in the opposite direction. This effect could be obtained by, for instance, lower absence due to sickness. It is clear that the way the labour market functions will play a decisive role for economic growth both in the coming two years and beyond the forecast horizon. An important issue for Sweden in the near future is whether we shall take part in the third stage of EMU.
At the end of last year the percentage of adults infected with HIV was estimated at 0.2% in the United Kingdom, 21.5% in South Africa, 37.3% in Botswana, yet only 3.9% in Angola. Why do infection rates differ so much between countries? In the 1980s the World Health Organization and associated researchers made rather optimistic projections of the impact of AIDS on populations in Africa using extremely detailed computer models of population structure. Complex demographic models were combined with strong simplifying assumptions about sexual behaviour. Unfortunately, this led the modellers to ignore those factors most critical to the spread of AIDS. They assumed that the probability of transmitting the HIV infection was a function of the number of sexual acts, not the number of partners of infected persons. But it is crucial to distinguish between the two.8 Ten acts with one partner have a smaller impact on transmission of the infection than one act with each of ten different partners. As Professor (now Lord) May, President of the Royal Society, pointed out, ignoring this simple and crucial distinction led to a serious underestimate of the rate at which AIDS was likely to spread.9 By building elaborate models of demographic variables for which a great deal of information was available and making simple assumptions for behaviour about which little was known, the large models used by the World Health Organisation produced misleading results.

But in reforming our pension system, it is important to separate two issues. First, how should we pay for the cost of present pension commitments? Second, what is the right structure for our pension system: which risks should be borne individually and which collectively? A debate is needed over whether present arrangements imply too much or too little sharing of risk. We should remember also that insurance is based on ignorance - ignorance of the outcomes facing each individual. But knowledge can turn risk into certainty. The advent of genetic testing could undermine a private market in insurance against longevity and illhealth. Even if insurance companies could not require testing as a condition of insurance, the fact that tests were available could increase even further the degree of adverse selection in such insurance markets. Pooling risks caused by unequal genetic inheritance might no longer be feasible. Insurance would become instead a question about redistribution, and hence a matter for public policy. 6. Conclusions  In this lecture I have stressed that most public policy decisions are a matter of the balance of risks. There is no certainty. Indeed, it is the illusion of certainty that undermines much public debate. As Bertrand Russell said, “The whole problem of the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts”. Recognising and modelling risks means understanding the limits to our present knowledge. Communicating risk is about transparency.