samchain/econo-pairs-v1 huggingface dataset:
Ravi Menon: Remarks on the MAS Annual Report Remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the MAS Annual Report 2020/2021, Virtual Media Conference, 30 June 2021. * * * Good morning and thank you for joining us today. GLOBAL ECONOMY The global economy is recovering from last year’s deep recession. The recovery is characterised by three key features: It has been a dual-speed recovery. The recovery is likely to gather momentum. But there are notable downside risks. First, the dual-speed recovery. The world’s two largest economies and Singapore’s two main trading partners – the US and China – are witnessing strong rebounds. According to consensus forecasts 1 , the US economy is expected to grow by 6.7% this year from last year’s 3.5% contraction, and China by 8.7% compared to 2.3% in 2020. The recovery in Europe has been more modest. Policy support has been on a smaller scale than in the US, and a renewed wave of infections in March and April has held the economy back. But economies are re-opening and pent-up demand is starting to flow through. In South East Asia, the recovery has been impacted by a resurgence in COVID-19 infections of varying intensities. The weighted average of ASEAN-52 manufacturing PMIs 3 fell to 51.7 in May, from 53.1 in April, even as the global index strengthened. The impact on services has been greater with the tightening of mobility restrictions. Second, a firmer global recovery is expected in the second half of 2021.

The FCA has a strategic objective to ensure that the relevant markets for financial services function well. Its formal operational objectives are to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers in relevant markets. It is obviously important that the FCA and PRA work closely together even though they have separate, differing objectives. Perhaps the most crucial aspects joining us are (i) that all PRA-authorised firms are dual regulated by the FCA as well for conduct purposes (ii) that the FCA has a primary objective to promote effective competition and the PRA has a secondary objective to facilitate it, and (iii) the FCA and PRA depend on shared data to carry out their roles. The close co-operation of the PRA and FCA is built into the system in part through cross membership of boards. The CEO of the FCA sits on the PRA Board (and is an FPC member ex officio). The CEO of the PRA sits on the FCA Board (and is also an FPC member). The PRA has a Board because it is currently constituted as a formal subsidiary of the Bank of England. It has been proposed that this arrangement changes so that the PRA becomes an authority within the Bank, and the PRA Board would become a new Prudential Regulation Committee. These proposals are subject to public consultation and will be debated in Parliament before being finalised.
EMU is not just some abstract concept dreamed up by a few people. It is based on solid economic grounds. When the exchange rate stability provided by the Bretton Woods system and by the barriers between national financial markets disappeared in the 1970s, a number of European governments became progressively convinced of the need for a single currency. The Maastricht Treaty is indeed the result of past major initiatives, such as the Werner Report in 1970 and the Delors report in 1989. BIS Review 63/1997  -5-  The removal of all tariff and non-tariff barriers to trade has made Europe the largest market in the world. The EU accounts for 21% of total world trade, against 17% for the US and 10% for Japan. The benefits of the sheer size of the Single Market are plain to see. The allocation of savings and investments is more efficient, competition is stronger, and the greater liquidity of financial markets makes more capital available at lower cost to finance profitable ventures. No doubt the European Monetary System and its Exchange Rate Mechanism have helped curb exchange rate instability and eradicate the inflation culture that prevailed in some countries; yet the current level of economic and business integration calls for the Europeans to take a further step towards monetary integration, for the benefit of all European economic agents and citizens. The benefits of the single currency are clear. It will reduce uncertainty and facilitate production and investment decisions.

EMU requires a sound legal basis to foster the credibility of the changeover to the single currency. The Madrid European Council asked the Commission to prepare a draft Council regulation on the legal framework for the use of the euro. This regulation is of the utmost importance. Market participants need legal certainty, not only as regards the new instruments in euro, but also as regard the continuity of instruments denominated in the former national currencies or in ECU. Besides financial markets, legal certainty is also important for citizens, as the emergence of a new currency is inevitably, at the first stage, a source of uncertainties. In this respect, technical preparatory work on the legal framework for the use of the euro is almost achieved. The European regulations that have been drafted and should be endorsed by the European Council in Amsterdam clearly state that the euro will be the BIS Review 63/1997  -6-  currency of the European monetary union as from the 1.1.1999 . As a consequence, the national currencies, in particular notes and coins, will continue to circulate during a transitional period, as subdivisions of the euro. Two other key elements are that the changeover will ensure the continuity of existing contracts denominated either in national currencies or in ECU and that the ECU will become the euro at a rate of 1 to 1. Besides legal security, EMU will reinforce monetary stability in Europe. The Maastricht Treaty provides for a monetary framework very similar to that prevailing in Germany and in France.
It is important for monetary policy that expectations of the interest rate are in line with the repo rate path. This is because it is market expectations of interest rate developments, and not the Riksbank’s own repo rate path, which determine the interest rates offered to households and companies. In addition, households’ and companies’ own expectations of interest rates govern their actions. Thus, expectations of future interest rates are important for the development of the economy. At the same time, the Riksbank’s ability to steer expectations in the longer run is limited in that we only steer the shortest interest rate, the repo rate, while the repo rate path is only a forecast. During the summer, market expectations of the repo have risen slightly in the short term, but fallen by more than 30 basis points in the longer run. Household expectations of variable mortgage rates, on the other hand, have risen significantly according to the National Institute of Economic Research. They are now largely consistent one and two years ahead with the Riksbank’s repo rate path from the most recent monetary policy meeting. However, households were still expecting a relatively low mortgage rate five years ahead. BIS Review 109/2010  7  Normalisation of monetary policy in general The normalisation of monetary policy includes, in addition to interest rate raises, the phasing out of the support the Riksbank has given to the banks.

As part of the efforts to improve the standard of pen-testing in Malaysia, Bank Negara Malaysia facilitated the formation of a task force last October, to set up a Malaysia chapter of the UK-based Council of Registered Ethical Security Testers or CREST, which will serve as a certification body for ethical hackers. We believe that this is a good platform to grow domestic talent in this area and promote international best practices in penetration testing. c. The Bank has also launched the Operational Risk Integrated Online Network or commonly known in the industry as the ORION system, to enhance the standard of operational risk 2/5  BIS central bankers' speeches  management in the financial sector. ORION is a risk surveillance system that consolidates information on operational risk incidences, including cyber-attacks. The system will strengthen the Bank’s ability to perform system-wide monitoring and early detection of developing trends in cyber-attacks and frauds within the financial sector. Moving forward, Bank Negara Malaysia is looking to address identified gaps in technology risk management practices within the financial sector. As part of this effort, the Bank is in the midst of conducting a comprehensive review of existing technology risk guidelines, including enhancing the expectations for the board and senior management to play a more active role in managing technology risk, and enhancing the resilience of IT infrastructures such as data centres. In today’s world where there is increasing uncertainty of what the future may hold, it is no longer possible for risk managers to rely solely on historical trends.
We should not lose sight of the absolutely vital achievement of establishing monetary policy regimes that carry credibility with households, firms and markets. But, in terms of demand and output, underneath a surface of smooth growth at the aggregate level lay horribly imbalanced economies. And given the length of time this persisted, it may well have affected the pattern of investment, and so led to a distribution of the economy’s supply capacity that would be out of line with better balanced demand. It is hard to tell. I don’t much like slogans, but the “Great Threat” might have been a galvanising refrain. BIS Review 21/2010  5  The monetary transmission mechanism: we must embed the renewed interest in financial markets, money and credit As Mark Carney, the Governor of the Bank of Canada, observed at Jackson Hole last summer, 3 economists developed a habit of thinking of the financial parts of the monetary transmission mechanism as more or less fixed for practical purposes. But, in fact, the evolution of the financial system – due to regulation, innovation, and animal spirits – can, subtly or not so subtly, alter the ways in which our interest rate changes flow through to the real economy. Twenty years ago there was great interest in this kind of thing, perhaps reaching its apogee in the BIS’s Cross Report 4 on the effects of interest rate and foreign exchange derivatives on monetary policy and macroprudential policy.

On average over the past decade the UK ran a current account deficit of around 2% of GDP, increasing in the years immediately before the crisis. That is about double the post-war average, but compares favourably with the United States, which had a deficit of around 5% of GDP before the crisis. Sterling’s depreciation has already boosted the UK’s external balance sheet, and net trade should benefit too over time. Arguably, more serious imbalances were internal. Perhaps surprisingly, they did not show up in unusually strong output or consumption growth, in contrast to the inflationary booms that preceded earlier busts. In the five years leading up to the crisis, annual GDP growth averaged around 2½%, similar to the post-war “trend”. Much the same was true for household consumption growth, and its contribution to GDP even declined slightly during 2005–07. But, with slower income growth, the household saving rate actually fell throughout this period. Household balance sheets expanded rapidly, with debt and house prices rising in tandem. Access to cheap and readily available finance, and a willingness to borrow, led to household debt rising to over 150% of annual income. That inevitably made the household sector more vulnerable to adverse shocks; that is what leverage does! But there were also important distributional shifts. One way of thinking about the rise in house prices and increase in debt is as a transfer of wealth between older (house-seller) and younger (buyer) generations.
The first check stems from public supervisory powers: a characteristic common to all financial systems is the existence of prudential supervision. The second stems from minor shareholders and bank creditors (either holders of ordinary or subordinated debt, or mere depositors), who exert scrutiny in what we know as market discipline. I am sure that these arrangements sound familiar to you: they are the three pillars of the New Capital Accord, or Basel II. But the great worth of Basel II is precisely the acknowledgement that these three levels are part of the structure which, since the very inception of financial systems, has promoted sound banking systems. The three Pillars reflect well-known aspects of the workings of financial and banking systems over many years. And there lies the merit of Basel II. It has been able to identify these three elements and  4  BIS Review 31/2003  to integrate them so as to achieve regulation which is more closely aligned to the management of banks and which, therefore, is more efficient. Let me conclude my remarks by raising the issue of corporate governance and transparency in deposit institutions, including savings banks. One could argue against paying much attention to corporate governance in savings banks, based on the lack of a shareholder structure. I do not agree. First, we should never forget that the issue of corporate governance is related not just to the minority shareholder issue, but also to that of companies raising resources from capital markets.

Since the mid-1990s, a main purpose of the economic policy framework has been to shelter the economy from fluctuations in oil prices. The set-up of the Government Pension Fund Global and the fiscal rule for petroleum revenue spending is one important defence mechanism in this context. The government’s net cash flow from the petroleum industry is transferred in its entirety to the Government Pension Fund Global. A transfer from the Fund to cover a non-oil budget deficit requires a decision by the Norwegian parliament. In addition to preserving the real value of the Fund for the benefit of future generations, this set-up insulates the budget from short-term fluctuations in petroleum revenues. It also leaves space for fiscal policy to counteract economic downturns. In effect, since 2013, the increase in oil revenue spending has roughly matched the fall in oil investment. Monetary policy has also played a role. Our monetary policy is oriented towards low and stable inflation. The operational target of monetary policy is annual consumer price inflation of close to 2.5% over time. Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment. With confidence in the inflation target among economic agents, monetary policy in Norway has been able to contribute to stabilising the business cycle. Lower income from oil exports following the fall in the oil price meant cost-competitiveness needed to improve. A floating exchange rate greatly facilitated this process.
Secondly, is having the ability to articulate this vision with others in the organisation and also with those that will be affected by the actions taken by the organisation. This is to ensure that the energies of the workforce will be channelled to achieving the strategic results required. Very often, the shared vision with those that are affected by the actions of the organisation also allows for the combined efforts to be mutually reinforcing. Thirdly, and importantly is knowing and understanding the business and the key elements that drive the organisation. Knowing how the system works and how the objectives might be realised. This involves having the knowledge, the skills, the information, the methodologies and the organisational structures needed to deliver the results. This is important so that the ideas can be translated into results. Fourth, given the nature of the business of the public sector and the diverse stakeholders involved, leadership in the sector requires coordination and integration skills that is able to pull together diverse thinking and diverse information and the ability to integrate the different perspectives into a solution that produces the desired outcomes. This will also involve coordination skills required to bring together not only the different parts of the organisation but also other organisations in the public sector that can contribute to achieving the desired results. Fifth, it involves managing trade-offs. Frequently, actions that need to be taken involve different implications on different target groups. This may involve interests that are conflicting.

Zeti Akhtar Aziz: Advancing women’s leadership in public life Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Women in Leadership Forum “Power sharing in the public sector”, Kuala Lumpur, 22 February 2011. *  *  *  Introduction In this twenty-first century, it is human capital rather than physical capital that will define performance and progress. Women represent half of the world population and therefore half the potential resource that can drive such performance. This is reinforced by the more recent trend that increasingly, the majority of those with college education are women. Increasingly therefore, this group represents a more significant resource potential that can rise to leadership positions. In emerging economies, where such high powered talent is scarce, gender has not been of an issue. Women have risen to leadership positions based on their merits and capabilities. Women in Malaysia have certainly made significant strides in their participation in all segments of the Malaysian economy and have demonstrated their ability to lead and to succeed in both the public and private sectors. It is my honour to be here today to speak at this Women in Leadership Forum on the topic on “Advancing Women’s Leadership in Public Life: Power Sharing in the Public Sector”. In Asia, in particular, women have risen to key positions and have been given the opportunity to contribute to the nation’s progress and development.
BIS Review 94/2008  5  Chart 1: Financial Market Liquidity  Chart 2: EME holdings of FX reserves  Liquidity index 1.0  Per cent  0.8  40  0.6  35  0.4  30  0.2 + 0.0 0.2  0  08  1  Chart 3: Brent Oil Prices Nominal  2008  2007  2006  2005  2004  2003  2002  0 2001  -5 2000  06  1.2  1999  04  5  1998  02  1.0  1997  00  2  10  1996  98  3  1995  96  4  15  0.8  94  5  20  0.6  92  6  $ (RHS) Annual percentage change (LHS)  25  0.4  90  $  Chart 4: Survey-based measures of activity Construction  US dollars (2008) per barrel  Real  Index: 50 = no change  Services  140  70  Manufacturing  65  120  60  100  55  80  50  60  45  40  40  20  1960  1968  1976  1984  1992  2000  0 2008  35 2000  2001  2002  2003  2004  2005  2006  2007  2008  Source: CIPS  Chart 5: Global inflation Per cent 9  EMEs UK US Euro Area  8 7 6 5 4 3 2 1 0  2003  6  2004  2005  2006  2007  2008  BIS Review 94/2008

A rise in long-term inflation expectations above levels consistent with price stability would be a very unwelcome development because inflation expectations are an important determinant of actual inflation. In principle, if inflation expectations rose, this could push up actual inflation despite the high unemployment rate. Obviously, this would make it more difficult for the Federal Reserve to use monetary policy to achieve its dual objective of full employment and price stability. On the issue of the size of the Fed’s balance sheet, the worry among some is that the rapid growth of the Fed’s balance sheet will ultimately lead to an inflation problem. This anxiety stems from the fact that periods of rapid growth of the monetary base (that is, currency plus bank reserves) in the past have typically been followed by rapid credit growth and inflation. While I understand the concerns, I do not believe they are well-founded. We have a new tool: the ability to pay interest on excess reserves and that should enable us to cut the link between the size of our balance sheet and credit creation and inflation. If we raise the interest rate on excess reserves, we can incentivize banks to hold the excess reserves with us rather than lend them out. And that should work, because the price of credit is an important determinant of credit demand. If the FOMC were to raise the interest rate paid on excess reserves, this would raise the price of credit. That, in turn, would limit the demand for credit.
At the time, these damped oscillations seemed to match well the damped harmonic motion of DSGE models. A good crop today foretold of an only slightly less good crop tomorrow. Third, most striking of all, every one of these forecasts was not just wrong but spectacularly so. Few forecasters foresaw even a slight downturn in GDP in 2008 and none foresaw a recession. Yet we witnessed not just a recession but the largest since the 1930s. The one-year-ahead forecast error in 2008 was 8 percentage points. The crop failed and the result was economic famine. While forecasting performance has improved in the period since, there has a continued string of serially correlated errors, with the speed of the recovery consistently over-estimated (Chart 2). The average forecast error one-year-ahead has been consistently negative, averaging 0.5 percentage points per year. The average error two years ahead has been over one percentage point per year. At root, these were failures of models, methodologies and mono-cultures. It has been argued that these models were not designed to explain such extreme events. To quote Robert Lucas once more: “The charge is that the [..] forecasting model failed to predict the events of September 2008. Yet the simulations were not presented as assurance that no crisis would occur, but as a forecast of what could be expected conditional on a crisis not occurring” (Lucas (2009)).

From those assumptions are derived equations of motion for the behaviour of  4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  consumers and firms – which, rather revealingly, are often called the Euler conditions. Then, and only then, are these first-order conditions for behaviour taken to the data to be tested. These models, so derived, predictably exhibit the same damped harmonic motion as Newton’s pendulum. Let me give a couple of examples of this approach in mainstream practice in economics and finance. The most famous equation in finance is probably this one:  Figure 1: The Black-Scholes Formula  Source: Black and Scholes (1973). This is the Black-Scholes options pricing formula (Black and Scholes (1973)). Under a (relatively) small set of assumptions, it provides a (relatively) simple analytical description of how to price a financial option. It cannot rival Einstein for its simplicity and aesthetic beauty. But it nonetheless has many of the trademark characteristics of theoretical physics. That should come as no surprise because this equation was itself drawn from theoretical physics. In seeking a solution to their option-pricing problem, Fisher Black, Myron Scholes and Robert Merton drew an explicit link between their contingent-claims pricing problem and the heat transfer equation in physics (Churchill (1963)). If not quite a lift and shift from theoretical physics, the Black-Scholes formula was certainly a genetic mutation.