samchain/econo-pairs-v1 huggingface dataset:
Most of the time this should not  8  BIS central bankers’ speeches  happen, as both aggregate demand and credit market shocks will tend to push the two policies in the same direction. Differential movements are more likely to arise in the face of supply disturbances. For instance, a beneficial supply shock will tend to push inflation below target, warranting a looser monetary policy, while it may also encourage a credit boom, warranting tighter macroprudential policies. But in any case, it is not clear that is such a problem. The instruments address different distortions, so one should expect them to move in different directions from time to time. Moreover, it is likely that the regulatory dials will be adjusted much less frequently than policy rates, so co-ordination should not be that significant an issue7. My concluding observations relate to the broader context within which macroprudential policies are conducted. Credit booms are times when everyone feels good and risks seem slight. Taking the credit punch bowl away before the party gets out of hand will be controversial, and banks and borrowers will be quick to claim “this time is different”. That is a good reason for delegation to a separate committee or agency with a longer perspective, much as we do with monetary policy. Even so, the pressures not to take action may be intense. Making macroprudential policies rule-based would be one response.

Introducing – or rather re-introducing – financial considerations to the analysis of macroeconomic fluctuations would also be returning the study of the business cycle to its historical roots. This task is already well under way in academia and I suspect the field of macroeconomics will look very different in a decade or so. We are, though, still in the foothills. But to give a broad-brush flavour of how financial intermediaries might affect things, we can look to the graphical extension of the New Keynesian model offered by Woodford (2010). The left-hand panel of Chart 6 shows the demand for funds from ultimate borrowers, LB, together with the total supply of loanable funds from savers, LS. The former is a decreasing function of the cost of borrowing, RB, while the latter is an increasing function of the return on savings, R. For simplicity, I shall take this to be the return on deposits and the same as the central bank’s policy rate. The marginal source of funds to intermediaries, however, is likely to be in the wholesale markets and, if unsecured, these will need to offer a higher return to compensate for the associated default risk. 4  BIS central bankers’ speeches  In the standard model with costless financial intermediation, the loanable funds market clears at A and the borrowing and saving rates are equal.
Bandid Nijathaworn: Where is global finance heading? Speech by Dr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Conference entitled, “Where is Global Finance Heading? The Stake of Emerging Economies in the International Financial System”, organised by Central Bank of Peru and Reinventing Bretton Woods Committee, Cusco, Peru, July 13-14, 2009. *  *  *  Thank you Chair First, let me thank the Central Bank of Peru and Reinventing Bretton Woods Committee for the invitation. It is an honour to be speaking to you today. The topic of this first session is “Time of upheaval: Where global finance is heading?”. This is definitely an important question given the current crisis is now almost two years old and is still evolving. Judging from the implications that the crisis has had so far on the world economy and financial markets, this is truly the first crisis of globalization. The crisis shows that financial upheaval can happen in any country, regardless of whether it is large or small, emerging or developed, and once happens, it can impart huge externalities on the rest of the world given the globalized nature of the world’s trade and payment systems. But more importantly, the crisis points to the weakness in the configuration of policies and financial regulation in the period leading up to the crisis that led to excessive risk-taking in the intermediation of global savings and investment across economies.

At this time, consistent with developments elsewhere, more positive signs in the real economy are also beginning to emerge in Asia, and this has led to a view that conditions for recovery look more promising in Asia, given the lesser impact on the region’s economic fundamentals and the banking sector. I find this view quite plausible. This is because, in the case of Asian financial crisis, it was also the countries that did not have a serious financial sector problem or external vulnerabilities that were able to recover relatively more quickly. On this note, let me digress to the issue of decoupling. If we divide the dynamic of financial crisis into three phases, namely, first the shock of the news phase when everything is on a downturn, to the second phase of market stabilization, and the third phase of economic  2  BIS Review 92/2009  recovery, it is clear from what has happened so far that, on the downturn, it is a recoupling story both for the real economy and for finance. The downturn has been quite synchronized because of the globalized nature of the world’s production, trade, and financial investment. Nonetheless, for the market stabilization and the economic recovery phases, I see decoupling in the timing and in the pace of recovery being a strong possibility.
Key drivers should carry their growth momentum going into H2/22 as we see high growth in consumption and better-than-expected tourist numbers, as well as more broad-based improvement in employment and income. Despite softening global economic outlook, tourism is gaining traction from pent-up demand to travel and not that sensitive to global slowdown. b. For stagnation to occur, we should expect to see severe slowdown in key drivers. For example, we should expect to see very low tourist numbers for the remainder of this year or sustained price increases that severely affect consumption. This is unlikely to occur. (4) Most concerning risk to a smooth recovery is risks to the tourism sector from unpredictable and volatile shocks, e.g. a new covid variant which could trigger a ban on international travel, and geopolitical risks. Part 4: Concluding remarks 1. Aggressively rate hikes in order to curtail aggregate demand and bring down high inflation may be the right approach for some. It is however not universal and depends critically on the underlying nature of high inflation, the cyclical position of economic activity, as well as structural features of the economy that determine the degree of persistence of price shocks. The right policy approach is thus more nuanced and country-specific. 2. In the Thai context, the decision to start a gradual and measured monetary policy normalization only recently reflects our cyclical position, where the recovery is gaining traction later than others.

The ERPT could be higher in case of large and rapid baht depreciation, especially if coupled with rising oil prices. This could trigger a non-linear passthrough to inflation and could have a contractionary effect to the economy. This has not materialized. We will keep close monitoring. c. In Thailand, there is less chance of wage-price spiral given that there remains slack in the labor market. Moreover, the nature of the labor market structure in Thailand, where there is flexibility in labor movement and a lack of labor bargaining power, has helped suppressed wage pressure and prevented broad-based and persistent increases in inflation. On the contrary, a tight labor market such as in some AEs could also set a wage-price spiral effect in motion. In such circumstances, bold rate hikes are necessary to prevent a shift to a high-and-entrenched inflation regime. • Thailand has low share of wage earners at 44% and little wage indexation. • Labor cost is relatively low at 15% of total production cost. (2) Limited risks from Fed tightening to derail a smooth take-off 1. Depreciation of the baht (and most other Asian currencies) has been influenced by the US dollar. 2. Interest rate differential is not causing the capital outflow. Thailand actually saw net capital inflows of 4.8 billion USD YTD. In the past 8 months, only 3 of out 8 months that saw net capital outflows. 3.
More generally, we know that the global economy operates under an important constraint – the sum of trade balances around the world, properly measured, must add up to zero. When one country follows policies that are designed to increase exports, there must be an offsetting adjustment elsewhere – either higher imports or fewer exports by another country. Similarly, there is the same adding up constraint in terms of the financial flows that accompany trade and investment on the capital account – current account balances around the world – again properly measured – must add up to zero. What this means in practical terms is that the outcomes for economic activity and capital flows for any individual country depend not only on the public policy and private decisions made within that country, but also on policies and mix of activities pursued in other countries. BIS central bankers’ speeches  1  For example, for Germany to have a large trade surplus with the rest of Europe, other European countries must run trade deficits. And if Germany runs such surpluses it must accumulate large financial claims on the other countries. Or, if the U.S. has an unsustainably high level of consumption, the adjustment to a lower, more sustainable level must be offset by greater investment and exports if the U.S. economy is to be able to operate close to full employment. The fact that it takes (at least) two to tango to make these types of adjustments is just another way of saying that our economies are interconnected.

In doing so, the Fed is also continuing to underscore that actions such as our purchase of U.S. government securities are driven exclusively by our monetary policy goals, and that these policy actions will not continue beyond the moment they become inconsistent with our dual mandate objectives. In general, policymakers should strive to ensure that we have both fiscal and monetary policy frameworks that are transparent and viewed as credible and durable. Interconnectedness means that events – be it the tragedy of a Japanese earthquake and tsunami, a revolution in Libya, or a financial crisis sparked by a housing boom and bust in the United States – can be transmitted to domestic economies located far away from the initial source of shock, often at market-speed measured in milliseconds. This interconnectedness underscores our common interest in cooperating not just to facilitate needed economic adjustments, but also to address fragilities in our interconnected global financial system. I think coordination on regulatory matters differs from on macroeconomic issues in two important respects. First, the benefits to cooperation and coordination on certain aspects of regulation seem easier to identify up front. Second, while policy coordination on regulatory issues is also very challenging, it may not be quite as difficult as in the macroeconomic realm. The stakeholders are not typically as numerous or diffuse, the problems are generally easier to identify, the gains from a cooperative solution are more obvious, and the cooperative solutions themselves may be easier to implement. On the regulatory side, I’ll start with a few broad observations.
Ravi Menon: A vibrant carbon market for a low carbon future Opening remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Climate Impact X Announcement Event, Singapore, 20 May 2021. * * * Minister for National Development Mr Desmond Lee, ladies and gentleman, good afternoon. Let me start with the big picture. To limit global warming to 1.5°C, global annual greenhouse gas emissions need to be halved by 2030 and reduced to net-zero by 2050. Yet, the trajectory of carbon emissions is still on a steady uptrend. Just on energy needs alone, demand in Asia is projected to double in 2030. Economic development will drive demand for fossil fuels, which is still the cheapest way to generate electricity in many parts of Asia. The switch to cleaner energy sources cannot be made in one leap. Coal accounts for about half of Asia’s total energy supply today. We need to shift the energy mix progressively, first to relatively less emissions-intensive fuels like natural gas, and then to renewables. This shift will require fundamental infrastructure changes: refurbishing power plants to generate cleaner fuels; and upgrading the power grids to manage different energy sources and to minimise the intermittency of renewables. To make this progressive shift to a low-carbon future, Asia will need a lot more transition financing than is available today. To spur more green finance for transition, we need to have two things in place: a price on carbon, and a market for trading carbon credits.

This is where a robust carbon market comes in. Carbon credits are essentially tradable certificates that represent the reduction, avoidance, or removal of a certain amount of emissions from the atmosphere. Firms can buy these credits to offset hard-to-abate emissions. To efficiently match the demand for carbon credits with the supply of these credits, we need a robust carbon market. In so doing, a carbon market becomes an important mechanism to channel funds to the emission reduction and removal projects that generate the carbon credits. Adopting a twin strategy of reducing and offsetting carbon emissions is a practical and effective way to reach our climate goals in time. Given Asia’s transition needs, a well-functioning carbon trading ecosystem is particularly relevant to the region’s decarbonisation effort. There are two types of carbon markets: The compliance carbon markets support the trading of emission allowances by entities subject to mandatory targets set by national, regional or international emissions reduction regimes. The voluntary carbon markets, on the other hand, are not tied to emissions trading systems or regulatory requirements. Any company or individual can purchase carbon credits to offset their own carbon footprint voluntarily. In our journey towards a greener world, voluntary carbon markets are expected to play a more impactful role. First, the voluntary market can cater to a wider group of firms and individuals. Emissions trading systems tend to cover sectors with higher emissions and so not all firms participate in the compliance carbon market.
Our latest economic modelling suggests that reaching net zero, if the transition is managed well, might have a small or negligible effect on economic aggregates such as GDP, unemployment and inflation [figure 7]. Indeed depending on what investment means for productivity, there is a chance the transition could prove positive overall. However, these costs depend crucially on whether the transition follows an orderly or disorderly path. Emission reductions may not follow a straight line as shown in many scenarios. It takes time for policy to work and policy adjustments will also be needed along the way. There may be higher investment uncertainty. Markets will not allocate capital perfectly, and without certainty about policy and technological outcomes, there may be bumps in the road as they absorb news about our path. In the NGFS we explicitly capture some of these transmission channels in our disorderly scenarios, for example by modelling delays in policy action and policy fragmentation across countries and sectors. They result in much higher impacts, particularly in countries with greater dependence on fossil fuel consumption or exports. This work underlines that central banks and supervisors, and the financial firms and system that we oversee, need to be prepared for a range of outcomes. But it also underlines that early action brings lower risks. 7  Preliminary analysis for the updated NGFS Climate Scenarios. Third, the impacts from physical risks will be significant.

The scenarios the NGFS have produced pull together, for the first time, both transition risks and physical risks, and their economic and financial consequences, in a coherent way. As a result, they are decision-useful, reflecting the totality of risks we will face. A guiding principle has been to try to shine a light on some of the uncertainties that exist. We have focused on multiple scenarios and multiple models to highlight the range of potential outcomes. Since modelling these impacts is subject to significant uncertainty and extensive academic debate, our work is open source and we seek your expertise and challenge. 4  The NGFS was founded by 8 central banks and supervisors including the Bank of England in 2017. Members are committed to sharing best practices, contributing to the development of climate and environment-related risk management in the financial sector and mobilising mainstream finance to support the transition towards a sustainable economy. It is currently comprised of 90 members and 14 observers. The first iteration of these scenarios, published in June 2020, drew from the existing work on mitigation pathways, climate change and adaptation that supported the Intergovernmental Panel on Climate Chance (IPCC) Special Report on Global Warming of 1.5°C.5 The NGFS will next month release an update, which will include bespoke scenarios, detailed macroeconomic modelling and a new online portal that can be used to explore physical risks. Insights from the design of the NGFS climate scenarios I would like to share some of the insights I’ve gleaned from this work.
But I think that, rather than an expense, we should consider enhanced systems or governance as long-term investments. Despite the difficulties, we are seeing adjustments to bank business models, partly as a result of the pandemic but also in response to a trend that had been under way for some time. Headway is being made in digitalisation and process optimisation, which may impact internal control functions. We are also seeing greater resort to outsourcing, and nimbler and more flexible ways of working are being implemented. All these trends involve changes that redress problems and improve efficiency. But, regrettably, they also pose additional risks. It thus seems that neither banks nor supervisors can lower their guard as regards risk. In fact, I believe future work is guaranteed for those of us who make a living from risk measurement and management. Financial education I will conclude referring to an area which I believe is not given sufficient attention, despite it being crucial for ensuring a responsible financial culture that will contribute to the future economic viability of banks, companies and individuals. Clearly, end-financial consumers, especially individuals, are the weakest part of the customerbank relationship. That makes it important for banks to take the utmost care when they advise customers to take up their services. 5/6  BIS central bankers' speeches  But we must acknowledge that a shortfall in financial knowledge among citizens is the starting point here. And this may have prompted mistaken decision-making.

Here in the UK, the Bank of England has adopted a new code for banks prescribing deferred variable performance payments, introducing the ability to reduce deferred bonuses when subsequent performance reveals them not to have been fully deserved, and paying bonuses in stock rather than cash. The deferral of bonuses awarded today allows them to be reduced before they are paid if evidence emerges of employee misconduct, error, failure of risk management or unexpectedly poor financial performance by the individual, their team or company. We are continuing to refine our approach. The Bank has just completed a consultation on a requirement for variable remuneration to be clawed back after payment and will consult later in the year on new standards for bonus deferrals. These provisions will apply not only to employees who are judged culpable directly, but also to others who could reasonably have been expected to identify and manage risks or misconduct but did not take steps to do so, and senior executives who could reasonably be deemed responsible by establishing the culture and strategy of the organisation. Where problems of performance or risk management are pervasive, bonuses should be adjusted for whole groups of employees. Of course, no compensation package can fully internalise the impact of individual actions on systemic risks, including on trust in the system. 19 To do so, market participants need to become true stakeholders. That is, they must recognise that their actions do not merely affect their personal rewards, but also the legitimacy of the system in which they operate.
John Gieve: A tale of two cycles Speech by Sir John Gieve, Deputy Governor of the Bank of England, to the North East Chamber of Commerce Durham Tees Valley Dinner, Durham, 19 June 2008. *  *  *  Introduction Ladies and Gentlemen, it is a great pleasure to be here this evening in what has been a busy week for the Bank, with the open letter to the Chancellor in response to the news on Tuesday that CPI inflation rose to 3.3% in May, the latest MPC minutes, and the Chancellor’s announcement last night of an enhanced role for the Bank on financial stability. Things have certainly changed in the year since your chief executive, James Ramsbotham, asked me to speak here this evening. The Bank's links with this region go back to 1828 when, in response to a crisis of confidence (this one over locally issued bank notes), we opened a branch in Newcastle. The move was not well received. The Newcastle Chamber of Commerce, wrote to the Directors of the Bank of England, saying "in the absence of any avowed motive for the establishment of a Branch of the Bank of England, in Newcastle, [we] see no prospect of good from such an establishment.......[We] most earnestly recommend to the Directors of the Bank of England to re-consider the policy of the measure they are about to adopt and to abstain from trying such an experiment on a system of banking, the advantages of which are so generally felt and admitted."

Yet this week the Governor’s open letter to the Chancellor to explain why inflation last month had deviated by more than a percentage point from the target was only the second written in over 10 years. And taking the past decade as a whole, this stability of inflation has not come at a cost to growth – quite the opposite in fact. Output growth has been high both relative to the rates  1  Indeed work done at the Bank suggests that in terms of inflation, it has been the most stable decade in many lifetimes – that is, since the Restoration at least (Benati (2006)). BIS Review 80/2008  1  achieved on average over the preceding 30 years and in comparison with our European neighbours. It also has been remarkably stable. 2 Of course that stability at the macro level disguises some big changes in the structure of the economy. Indeed it has provided a platform for change. The North East for example is now much more diverse than it was and less reliant on a few large industries. And, overall more people are employed in the region: the number employed in the North East has risen by more than 100,000 in the past ten years. And export growth remains relatively buoyant. In contrast to this picture of stability, the preceding 3 decades were scarred by painful recessions where unemployment rose sharply, and inflation fluctuated wildly.