samchain/econo-pairs-v1 huggingface dataset:
Scots have shaped the modern world through their contributions to culture and science. The pioneering work of Scottish economists from Adam Smith to Sir James Mirrlees has had great influence on my profession. Among them is David Hume, born just a short walk from here and a great friend and collaborator of Smith. While better known as a philosopher, Hume’s essay “Of the balance of trade” set out the theory of how trade imbalances between nations sharing a currency (gold) would self-correct as inflows of money to surplus countries raised their prices and reduced their competitiveness. As an empiricist, Hume would doubtless admit that recent euro area experience of persistent current account deficits leading not to self-correction but instead to crisis requires a more elaborate explanation. Fortunately economists have over the years obliged with substantial work on the economics of currency unions. Given the recent focus here on the currency and the fundamental role of the Bank of England in maintaining monetary and financial stability across the United Kingdom, I want to draw on that body of economics today to review some of the most important issues with respect to monetary union. I will stick rigidly to what Thomas Carlyle described as the dismal science. Any arrangement to retain sterling in an independent Scotland would need to be negotiated between the Westminster and Scottish Parliaments. The Bank of England would implement whatever monetary arrangements were put in place.

Transcript of the questions asked and the answers given by Dr. Willem F. Duisenberg, President of the ECB, and Christian Noyer, Vice-President of the ECB Question: I would be very interested if you had anything to say about the exchange rate of the euro, if the central bankers of Europe seem comfortable with it. It seems that the strategy of the ECB is now, in light of today’s actions, a double strategy to re-invigorate the European economy. On the one hand, you got the exports boosted by the euro and, on the other hand, you got an interest rate cut to lubricate the economy as well. Duisenberg: First of all, as far as the exchange rate of the euro is concerned, I always like to take a slightly longer term perspective than is normally done in articles and considerations about it. I would like to point out that, if you look at the rate of the euro, and look back to what we - in our jargon - call the synthetic euro, the euro that you can calculate before the euro was in existence, then you can observe that the rate of the euro to the dollar has been more or less stable at around a level of USD 1.08 to USD 1.10 from the middle of 1997 until early September 1998. In the middle of September it started to rise to reach a level of 1.16 at the end of the year, and that was the level at which we entered the euro era.
6 And, such an approach would require binding agreements amongst home and host resolution authorities. Vague assurances would not do the trick, as domestic authorities could change their minds when it really mattered. Host and home authorities would need “skin in the game” to underpin co-operation. And co-operation in distressed circumstances could helpfully flow back to how supervisors work together in peacetime. An obstacle to such an approach might be that in some countries, legislation mandates preferential treatment of creditors and depositors of local entities of cross-border banks. But that might be weighed by legislatures against the current reality that when the fiscal authority finds itself injecting equity to save a bank and preserve stability, it protects worldwide creditors not just its home creditors. To be clear, I am not advocating any particular approach here. I just want the authorities to articulate the issues clearly, so that our leaders can make a choice and think through the consequences of that choice. I’m not sure that it has really been put to them up to now. And, of course, whatever is done, within Europe we would need to find an EU version that sat between national and global regimes. Summary My purpose today is not to advocate solutions. It is to identify the big issues and to float some possible avenues for discussion in the EU and internationally. The big question is clear enough. Can we resolve distressed LCFIs in an orderly way without injecting public money?

Given this it may seem paradoxical for the Basel Committee to recommend a leverage ratio that does not vary with risk. However, we should remember – and this is important – that the traditional capital requirement has not prevented banks from borrowing too heavily, and this was one of the central problems during the financial crisis. As long as the economy ran smoothly the banks could use their debt-burdened balance sheets as levers and make large profits. However, as soon as the downturn began and the banks began to make loan losses they had hardly any capital that could be used to bear the losses. Instead, governments and taxpayers had to provide funds to rescue the indebted banks. Of course we do not want to experience such a sequence of events again. It is therefore positive that we are introducing a complementary capital requirement that ensures that the banks do not overburden themselves with debt. The idea behind the leverage ratio is to limit the growth of credit when the economy is going well. It therefore acts as a complement to the counter-cyclical capital buffer and helps to prevent an extreme expansion of the balance sheets. Another reason for introducing a leverage ratio is that most large banks use internal models to estimate the risks associated with their lending. If banks estimate these risks incorrectly, for example by underestimating them, they may not hold enough capital.
There were manifest conflicts of interest, originators and brokers had limited interest in ensuring continued monitoring of products and credit ratings were inflated, conveying a false sense of security. A euphoric bubble thus developed, based, in Alan Greenspan’s words, on “the complexity of the interactions of asset markets and the economy”, and which concealed a massive global under-pricing of risk. Market participants seem to have been aware of the growing risks but were unwilling to retrench. You might recall Citibank’s Chuck Prince’s memorable words during the onset of the crisis that “as long as the music is playing, you’ve got to get up and dance. We’re still dancing”. Market players failed to appreciate the speed at which demand could evaporate and risk aversion could increase. This soon resulted in record-high risk premia, seized-up interbank markets, acute liquidity and credit shortages, bank failures and a widespread loss of confidence. Meanwhile the high degree of financial market integration had created the premise for a simultaneous build-up of systemic risk. Financial institutions did not internalise the costs arising from the too-big-to-fail and too-interconnected syndrome. Central banks had been monitoring these trends, but it turned out that the regulatory tools were not designed to address systemic risk. Neither was the strength of the feedback loop between the financial  BIS Review 67/2010  1  system and the economy fully anticipated. Unfortunately, these all proved to be critical weaknesses.

There are fewer of the pegged exchange rate regimes that often came violently undone during past periods of acute market stress. Monetary policy regimes are generally better structured and more coherent. Banking systems are better capitalized and supported by stronger regulatory and supervisory frameworks. Foreign exchange reserve cushions are larger and generally still ample. I think we can remain cautiously optimistic about EMEs’ prospects overall in the years ahead, although particular countries will face considerable challenges over the near term. How will we at the Fed take in and respond to these developments? As I’ve already noted, foreign developments factor into our assessment of the U.S. outlook. Recent FOMC statements have sometimes made this connection explicit, noting that the Committee will be monitoring foreign economic and financial conditions closely. The weakness we have been seeing in EME economies and markets is one of the considerations behind the Committee’s assessment that the appropriate pace of policy normalization is likely to be gradual. The federal funds rate is only one element of the broader set of financial conditions affecting the U.S. growth and inflation outlook. Tighter financial conditions abroad do spill back into the U.S. economy, and policymakers must take this into account in their assessment of appropriate monetary policy. Of course, this does not mean that we will let market volatility dictate our policy stance.
Governor Boris Vujčić's speech at the FBF Executive Seminar Published: 4/7/2023  Governer Vujčić held a keynote speech at the FBF Executive Seminar "European finance in 2020s: new risks in a volatile world" organized by Florence School of Banking and Finance - The European University Institute on the 29 June 2023 Keynote speech at the Florence School of Banking and Finance Executive Seminar June 29, 2023  Introduction Over the last ten days that I have been on the road I spoke about CBDC to bankers, about the war in Croatia and economic lessons for the Ukraine, important, but heavy topic, and, of course, about monetary policy, interest rates and the balance sheet. So, I am happy to have been given a different topic for the last speech – financial stability. Thorsten told me to speak either about what the entry into the euro area means for the financial stability of Croatia, or about the risks to financial stability. I shall try to combine both and tell you what I have learned about financial stability from Croatian experience over the last 30 years, and how I see things now that we got into the euro area and the banking union. Over the last three decades, the Croatian banking system went through a transformation from a group of mostly bankrupt socialist financial institutions into a set of strictly supervised, overwhelmingly private, internationalised companies with strong corporate governance.

In addition, an upswing is likely to be held back by product and labour market rigidities. BIS Review 19/2002  1  So all in all, it is hard to see how the coming economic upswing can be as rapid as earlier recoveries. But the world economic picture is now appreciably brighter than last autumn and the outlines of an upturn are becoming increasingly clear. Inflation in Sweden is high If the picture we present in the Inflation Report holds good, the present cyclical dip in the Swedish economy will turn out to have been the mildest for over thirty years. GDP growth was admittedly subdued in 2001 but the figures from Statistics Sweden do not show any negative rates. Neither has the labour market deteriorated as much as usual. Nor have any serious imbalances arisen. So thus far there is reason to be positive about the economic situation; most leading indicators point to an economic recovery, with an upturn in activity during 2002. There is, however, the problem that inflation has for a time been clearly above the Riksbank’s 2 per cent target. To a certain extent the comparatively high inflation can be explained by various supply shocks that have raised the prices of electricity, meat, fruit and vegetables, for instance. The background to these shocks includes the previous winter’s low precipitation for hydroelectric power, livestock diseases and poor harvests due to last autumn’s unusually cold weather in Europe.
2.2 On compliance with OBL requirements As noted in the accompanying explanatory notes, the Bank of Albania finds that the draft-budget 2017 complies with the legal requirements laid down in the OBL. 2/5  BIS central bankers' speeches  Thus, beyond the reduction of the public debt: - The expected nominal GDP is within the International Monetary Fund projections, detailed in the last publication of the World Economic Outlook. - The projected level of capital expenditure is higher than the programmed level of public borrowing; - The draft-budget 2017 envisages a contingency of funds equal to 0.9% of total expenditures (ALL 4 billion), to offset adverse effects from the exchange rate and interest rate volatility on the level of public debt; - The draft-budget 2017 does not envisage revenues from privatisations. 2.3. On public finance stability The Bank of Albania deems that the programmed reduction of public debt is a positive step toward enhancing the fiscal stability and reducing the weaknesses that arise from the still-high level of public debt. Also, the OBL sets out certain legal requirements, which: - require the progressive reduction of the public debt during each fiscal year; - anchor the macroeconomic framework to IMF projections; and, - limit the concentration of the budget deficit in certain periods of electoral years, These requirements help to discipline the fiscal policy, improve public finance stability, and enhance the interest of investors, both domestically and internationally, in Albanian debt instruments. 3.

What is more, the Swiss franc has only seen a moderate rise against the euro. As Swiss households and companies are on a solid financial footing, they are shielded – so to speak – against a tightening in credit conditions. Lastly, the stronger Swiss franc vis-à-vis the US dollar has limited the impact of higher commodity prices. Several other factors, like a robust labour market and a competitive industrial sector, could cushion the negative repercussions of the financial crisis in Switzerland. Against this backdrop, the SNB is expecting real GDP to grow between 1.5% and 2% this year. Inflation should be below the 2% mark again in the course of 2008. These forecasts still involve substantial uncertainties. Given the present state of the economy, the current interest level seems to be appropriate. However, the SNB will keep a close eye on further economic developments and inflation so that it is able to identify when action needs to be taken and react in a quick and flexible manner. BIS Review 51/2008  1
In this way, all those who wish to closely follow our reasoning can do so and it creates a basis for assessing our evaluations and decisions. I can also mention that the Riksbank Governor appears before the Riksdag Committee on Finance twice a year to answer questions on monetary policy. On the first occasion every year we publish an Inflation Report that contains a special appendix with material for assessing monetary policy over the past 2-3 years. This contains, for instance, comparisons of our forecasts with other forecasts and with outcomes. In addition, we Executive Board members hold around forty published speeches every year, where we can describe our joint or our individual view of economic developments. We also publish information in our quarterly journal and other publications issued by the Riksbank. The Riksbank thus publishes a substantial amount of information that enables the general public to examine our analyses and to understand how monetary policy decisions are made. At the same time, it creates the conditions for a serious debate on monetary policy. This is a major change compared with central bank history. Monetary policy is assessed regularly in Sweden. In 1999, the Riksdag Committee on Finance made the assessment that the Riksbank’s increased independence meant that there was a greater need to examine and assess monetary policy. Since then, the Committee has annually examined the monetary policy conducted over the past three years in connection with a more in-depth review of our activities.

We have been intervening since the beginning of 1990 to develop the Hong Kong dollar debt market, again because the market was considered essential for effective financial intermediation, and, regrettably, the private sector was not able to develop one that is properly structured. The linked exchange rate system is also a product of the policy of positive non-interventionism. The Government intervened to fix the exchange rate because we found out in 1983, and since, that there is a need for a monetary anchor. In the absence of such an anchor, the value of our currency will be, in mathematical terms, an indeterminate. In other words, it is not something that the free market can determine in the best interest of the community without intervention. We have had four speculative attacks on our currency since the outbreak of financial turmoil in the region in the middle of last year. BIS Review 67/1998  -3It is very well known to almost everyone in the market that a handful of hedge funds have on each occasion conducted a double play in the stock futures market and the currency market. We have come to realise how this double play works, although it has only become apparent, at least to us, in the third and fourth attacks in June and August this year respectively. On each occasion, interbank interest rates were pushed higher, to varying degrees, with a view to engineering a sharp fall in the stock index futures.
In normal times, when risk factors are contained and can be diversified away, the interest rate channel, working through inter-temporal arbitrage, is the prime conduit of monetary policy (see slide 2). It sets the floor for term borrowing costs. Parsing longer-term yields into two components – the average level of the short-term policy interest rate expected over the term to maturity of the asset, and the risk premia – expectations of monetary policy pin down the first component. The mechanism through which this occurs is the inter-temporal financial arbitrage I just described. Term and liquidity premia are the additional returns that investors demand as a compensation for their reluctance to bear interest rate risk over long-duration assets, and for their decision to forgo liquidity services – I am abstracting here from credit risk, to which I will return later. When markets are properly functioning, non-depository institutions – dealers, hedge funds, investment banks – provide immediacy by offering lenders and borrowers their capacity to take positions on both sides of the market. Their ready availability to take positions as lenders and borrowers supports market liquidity, namely the ease with which a lender can liquidate a position before maturity. When market liquidity is secure, lenders are willing to engage in finance, trades in long-duration assets are active and the liquidity premia are contained. And, most importantly, they are steady. With a steady premium, the expectations  2  There are two reasons for idiosyncratic fluctuations of reserve demand by individual banks.

A passive fiscal policy means that the fiscal authority must be ready and willing to adjust its policy stance (revenues and primary spending) in such a way as to stabilise its debt at any level of the interest rate that the central bank may choose. Or, to put it another way, borrowing from Woodford’s terminology, 8 fiscal policy needs to be “Ricardian”. 9 Although the Treaty shows an awareness of the need for consistency between monetary and fiscal policy, in the sense described above, to ensure lasting stability, it did not foresee that fiscal policy could go off track to an extent that requires dedicated institutions and policies able to provide financial assistance, against conditionality, in order to restore sustainability and preserve financial stability in the euro area. The creation of the EFSF/ESM in charge of providing support to euro area Member States in difficulties and enforcing appropriate conditionality has filled this gap. It provides the euro area with a means to restore “Ricardianess”, thereby minimising the risk of “fiscal dominance”. Against this background, it is easy to understand the ECB’s decision on 6 September to undertake Outright Monetary Transactions (OMTs) in secondary markets for sovereign bonds in the euro area, and to understand the specific framework within which they will be implemented. The aim of OMTs is to preserve the singleness of monetary policy and to ensure the proper transmission of the monetary policy stance to the real economy throughout the euro area.
François Villeroy de Galhau: Insurance and pensions – institutional innovation, economic innovation, technological innovation Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the7th annual EIOPA Conference, Frankfurt am Main, 22 November 2017. * * * Ladies and Gentlemen, It is a pleasure to be in Frankfurt today for this 7th Annual EIOPA Conference and I wish to warmly thank EIOPA’s Chairman Gabriel Bernardino for his kind invitation. I must say that I feel at home, since we are not far away from the ECB building where I take part in the meetings of the Governing Council at least every two weeks. But today I will speak in my capacity as President of the French supervisory authority, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), which belongs to the board of supervisors of EIOPA, and which is in charge of the supervision of both insurance companies and banks in France. This is an important responsibility as the French insurance market is the second largest in the European Union, just behind the United Kingdom, with an aggregated balance sheet of approximately EUR 2,600 bn. Given that I am speaking before the panel dedicated to innovation, I will take this opportunity to focus on three kinds of innovation, which in my view can lead us to rethink insurance and pensions: institutional innovation, economic innovation and technological innovation. 1. Institutional innovation Let me start with institutional innovation.

In line with this principle, the validation of internal models, for instance, should preferably remain the responsibility of the NCA in order to reflect the close link between this decision and the on-going dialogue that takes place between the insurer and its national supervisor; EIOPA for its part could concentrate more efficiently on the essential task of enhancing the harmonisation between national practices. In addition to these desirable adjustments of the European institutional framework, there is a need to make concrete progress towards a European resolution mechanism, which would provide more adequate tools to limit the impact of an insurer failure and increase trust and confidence. France has been working along these lines at national level and such a mechanism will be in place in our country before December. 1 The French resolution insurance regime requires insurers of a certain size to set up preventive recovery plans, which will form the basis for preventive resolution plans. Moreover, the ACPR is entrusted with several powers to be used in a resolution context, such as the possibility of appointing a resolution administrator in the insurance undertaking, limiting the distribution of dividends, or organising portfolio transfers to another insurer. 2. Economic innovation Let me now turn to my second point: economic innovation. As Europe’s economy is close to the “technological frontier”, businesses need to innovate more. As such, they need to be able to take more risks, which requires more equity financing, over the long term, rather than debt financing.