samchain/econo-pairs-v1 huggingface dataset:
Peter Praet: Japan and the EU in the global economy – challenges and opportunities Speech by Mr Peter Praet, Member of the Executive Board of the European Central Bank, at the conference “Japan and the EU in the global economy – challenges and opportunities”, organised by Bruegel, the Graduate School of Economics, Kobe University, and Fondation France-Japon de l’EHESS, Brussels, 7 October 2013. *  *  *  I would like to thank Stephan Fahr, Georgi Krustev and Ana Lima for their contributions to this speech; all views expressed remain mine. Ladies and gentlemen, It is a pleasure to be able to share some thoughts on the challenges and opportunities Japan and Europe are facing in the global economy. Since the beginning of the financial crisis, there has been no shortage of challenges along the road back to what I would call the “normal functioning” of our economies. One of the biggest challenges I see is still to be addressed: that of how to grow in an era of deleveraging. Deleveraging can occur in an orderly fashion or it can be chaotic. It may drag our economies down or it can place them on a stronger footing. Which of these will be the case depends to a large extent on how we manage the process. Today, I will focus my comments on the policy challenges faced by our two economies, especially as regards how to manage the deleveraging process in the euro area, keeping in mind the Japanese experience during the 1990s.

While common monetary policy has been successful, the crisis has shown that we need more solid common institutions in other policy areas. In particular, a common monetary policy requires a common regulatory framework for the financial sector to be able to adequately repair the financial system, thereby securing a durable recovery in the euro area. The adverse impact of “zombie banks” and the evergreening of loans in Japan serve as a stark warning signal. Given the challenges ahead, we should not relax our efforts to put the euro area economies on track to strong and sustainable growth. That way, we can turn the current challenges into opportunities – as the title of today’s event suggests. Further managing the deleveraging process will be key, especially balancing the speed of adjustment and reforming euro area governance. Let me elaborate on these two aspects in turn. Managing the deleveraging process To overcome debt overhangs, we have basically two options. We can consolidate or restructure debt to address the nominal debt stock; or we can implement growth-enhancing structural reforms that make our economies fitter to grow out of the debt burden. Or we could opt for a combination of both. A third theoretically possible option allowing for higher inflation to reduce the real value of the debt would go against the core mandate of central banks. In recent years, we have seen some consolidation in Europe.
I would once again like to emphasize that any new data or information on the inflation outlook may lead to a change in the policy stance of the Central Bank. Therefore, the indicated path for the policy rates should not be perceived as a commitment on behalf of the CBT. Distinguished Guests, Revised projections suggest that the contribution of energy, food and services will be close to 5 percent at the end of 2009. In other words, assuming no further hikes in administered prices (except those implied by automatic pricing mechanisms), meeting the 4 percent target at the end of 2009 would be possible only if the prices of goods excluding food, energy and tobacco deflate by 3 percent. However, factors such as rising import prices, potential second round impacts of supply shocks, and the structural inertia in inflation could continue to impose downward stickiness in goods prices. Therefore, converging to the medium term target of 4 percent may extend beyond two years, even when tight monetary policy is maintained for an extended period. Under these circumstances, getting inflation back to the 4 percent by the end of 2009 would require offsetting the first round effects, and thus create undesired fluctuations in economic  BIS Review 62/2008  11  activity and relative prices. That is why we envisage a framework in which inflation remains higher than 4 percent at the end of 2009. The forecasts presented above deserve particular attention, given that inflation is likely to stay above the target in the next two years.

Benoît Cœuré: Policy coordination in a multipolar world Remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the 5th annual Cusco conference organised by the Central Reserve Bank of Peru and the Reinventing Bretton Woods Committee: “70 years after Bretton Woods: Managing the interconnectedness of the world economy”, Cusco, 22 July 2014 *  *  *  I would like to thank Michele Ca’ Zorzi and G. Georgiadis for contributing to these remarks. I remain solely responsible for the opinions expressed herein. Dear Governor Velarde, dear Marc Uzan, ladies and gentlemen, I would like to thank the organisers for giving me the opportunity to share some thoughts with you on the changes in the international monetary system (IMS) and the role of monetary policy coordination. History casts a long shadow over the IMS. Over the past three decades, however, the global economy has changed in decisive ways. Three aspects are particularly striking. First, financial factors have become an increasingly relevant source of cross-country interlinkages, with some evidence of cross-country de-linkages since the global financial crisis. Second, emerging economies have raised their clout, as reflected by the impact of their business cycles on global growth and the growing use of their currencies: the global economy has become multipolar. And third, monetary policy in advanced economies has – more recently – entered new territory by resorting to unconventional measures.
BIS Review 68/2006  3  The first one of these risks is the continuance of the increase in oil and commodity prices. Moreover, continuance of the controlled course of the increase in total demand provided by tight fiscal and monetary policies is a must for preventing a demand-based inflationary pressure. Prices of public goods and services, indirect taxes and the incomes policy should be consistent with inflation targets. Developments in the risk premium, which result from monetary policies of developed countries and are likely to cause fluctuations in global liquidity conditions, also pose risks to the disinflation process. As I have mentioned before, attempts and statements that may damage expectations can also lead to unfavorable effects on the disinflation process. In this framework, relations with the IMF and the European Union are two critical anchors in terms of medium and long-term expectations. Support from international institutions is a significant factor bringing about additional confidence. European Union negotiations for full membership provide support to the national program in the framework of the improvement of the Turkish economy’s investment environment and increase the predictability of the economy in the medium and long term. Uninterrupted implementation of structural reforms is of critical importance. The continuance of the reform process is the only way to sustain and build on the achievements made up to now. Social Security Reform is a significant step in this respect.

However, it can be said that this period of time is much shorter in case of the expectations channel, which is a part of the transmission mechanism and operates in a very effective manner in our economy. At this point, I would like to emphasize that the Turkish economy has entered a normalization process. As a matter of fact, in comparison with previous periods, the banking sector has a more robust structure and fiscal dominance has decreased considerably. As a result of this structure, any measures to be taken regarding the policy instrument should be evaluated in terms of the impacts of the monetary policy on inflation, rather than in view of the likely effects of these measures’ consequences on the above-mentioned areas. In other words, the increase in short-term interest rates, which are the policy instrument, should be evaluated merely as a necessary reaction of monetary policy for achieving the medium-term inflation targets. When the sub-indicators demonstrating the main trends in inflation are analyzed, it is observed that the targets for 2007 and 2008 seem achievable in light of the medium-term outlook as of the present date, as long as the cautious stance in monetary policy is maintained. Certainly, for the course of inflation to follow a path in line with the forecasts of the Bank, certain conditions need to be satisfied. In other words, there are some risks to the sustainability of the disinflation process in the medium-term.
The analysis of the latest statistical data points to a further decline in the annual inflation rate, which followed a lower-than-forecasted path and ran below the lower bound of the variation band of the flat target, due to the steeper drop in volatile prices and to the increasingly weak inflation on external markets, overlapping the lingering negative output gap and the ongoing downward adjustment in inflation expectations. In December 2014, the year-on-year inflation rate stood at 0.8%, while the average annual inflation rate stuck to 1.1% and the annual average inflation rate based on the Harmonised Index of Consumer Prices – which is relevant for assessing convergence with the European Union – came in at 1.4%, the same as in the previous month. The fall in the inflation rate allowed for successive policy rate cuts (to an all-time low of 2.25% in February 2015) and for interbank rates to decline markedly to record lows, amid favourable liquidity conditions in the money market. In August 2014, the NBR resumed the rate cutting cycle so that in February 2015 the monetary policy rate ran at 2.25% versus 5.25% in June 2013. Moreover, January through November 2014, the NBR gradually lowered the minimum reserve requirement ratios. Thus, at present the minimum reserve requirement ratio on leu-denominated liabilities of credit institutions is 10% (from 15% at end2013) and that on foreign currency-denominated liabilities is 14% (from 20% in December 2013).

These are the Top Islamic Bank and Top Development Financial Institution awards to recognize these two categories of institutions for their contribution towards the overall business growth of CGC and the SME sector. These new categories illustrate our sincere acknowledgment of the financial institutions that have made significant contribution to SME development. We believe 2008 is an important year for CGC. Foremost is that it marks the 36th year of the Corporation's involvement in SME development. It is also the year which will see the implementation of the third phase of our three-year business transformation plan and the successful completion of the three-year strategy. The necessary preparatory work under the transformation plan has largely being completed and we hope to take the first step towards achieving financial sustainability. Another significant milestone in 2008 is the establishment of the SME Credit Bureau, a watershed event in CGC's evolution. The Bureau is a source of credible and reliable credit information that serves the needs of both the SMEs and the potential financiers. This reflects the natural progression for the CGC in its continuous efforts to enhance access to financing by SMEs. The establishment of a SME Credit Bureau, by CGC in strategic collaboration with Dun & Bradstreet, would no doubt complement the other initiatives of the Government and the financial sector in promoting growth and development of SMEs. We have seen how CCRIS, where real-time and comprehensive information on consumers' credit exposures and history is readily available.
After the crisis, there was some excitement about domestic demand being the driver of growth, and there was some justification for such enthusiasm. There was certainly a component related to the growth in incomes and private demand. But there was also a significant component related to public spending and the rapid growth of domestic credit. The outcome is higher debt levels for both households and the Government. This is clearly not a sustainable strategy for growth. Indeed, the experience has shown that there are limits to how fast and how sustainably we can grow by relying on domestic demand alone. Therefore, going forward, while domestic demand will continue to support growth, we really need to strengthen our integration with both the regional and global economy, and by implication, strengthen our overall level of economic competitiveness, if we are to achieve sustainable growth over the long term. Returning to the economic outlook, the good news is that we are seeing more sustained growth around the world and that is already beginning to benefit Malaysia and creating more balanced growth of the Malaysian economy. Now what are the potential clouds over this rather sunny outlook? There are several, but in the interest of time, I will just mention five. The first of this is the slow recovery of investment in the AEs after the crisis. It has been noted that this recovery, unlike recoveries from past recessions, has been accompanied by rather lackluster investment. This is despite the fact that companies are sitting on large piles of cash.

In that respect, Jens Weidmann’s call for significant pay rises in Germany in 2014 was a courageous and welcome move. Deleveraging is another factor that can act as a drag on demand. A significant deleveraging process took place after the recent financial crisis – among households, firms and also governments. Household debt declined the most in those countries where it had grown the most, such as the United States or Spain. Corporates reduced their net debt positions to insulate their balance sheets from the crisis. And, to make sure that debt remained sustainable, governments had to reduce their deficits from the very high levels reached during the Great Recession of 2009. Unfortunately, fiscal consolidation polices were not sufficiently coordinated in the euro area. While deleveraging might be individually desirable for over-indebted groups, if all agents scale down their debts simultaneously, aggregate demand inevitably slows. Turning to more structural factors, demographic trends and productivity can also weigh on demand through their impact on savings. What are the determinants of savings in the long run? According to economic theory, people save more when the rate of the economic growth slows, either because fewer people are in work or because the productivity of each worker decelerates. Several factors are likely to reduce the growth rate of the working age population and increase the average age of workers: the gradual exit of baby boomers from the workforce, the one child policy in China and the decline of fertility rates in the OECD.
Some of these are “left-overs” from the first bilateral agreements, some are new issues which have been raised by either the EU or Switzerland. The EU wanted the adoption of anti-fraud measures and the creation of a tax system in Switzerland which would allow the EU to adopt a regime of exchange of information between tax authorities. On their side, the Swiss sought an improved cooperation in the areas of internal security and asylum policy. The negotiations on seven out of the ten issues have now been substantially completed. We hope that this second round of negotiations will be concluded this year, provided that the right balance can be struck in the overall package. You may well be asking yourselves: why doesn’t Switzerland simply join the EU instead of following the bumpy path of bilateral agreements ? The reason is that there is still no consensus in Switzerland on the question of EU membership. Winston Churchill used to say to his chauffeur: “Drive slowly. We are in a hurry”. These words could apply to Switzerland’s policy on Europe. Eleven years ago the Swiss people voted “no” to entry into the European Economic Area, because many saw this as a first step towards EU membership. Two years ago a referendum aimed at speeding up the process towards EU membership was likewise roundly rejected. Since any further moves would clearly lack political support within the country, EU membership is not on the Swiss agenda at the present time. There are many reasons for Switzerland’s scepticism.

In a boom phase such a policy will tend to have a restrictive effect and in a cyclical downturn it will tend to have an expansionary impact. ·  The second element is an inflation forecast. We publish a quarterly forecast of medium-term inflation. Not only does our forecast provide extremely valuable information on the future effect of monetary policy; it also plays a key role in explaining the central bank action to the public. ·  The third element is the publication of a target range for the three-month interest rate. The target range sets the parameters for day-to-day implementation of monetary policy. Our experience with the new approach is positive. We have been able to enhance the transparency of monetary policy and to simplify lines of communication with the market. How do we take account of the fact that Switzerland is now fully surrounded by the euro zone? Indeed, the introduction of the single European currency at the start of 1999 has profoundly changed the environment for our monetary policy. But the fears that were expressed when the euro was introduced four years ago failed to materialise. In particular, the Swiss franc is no more volatile against the euro than it had previously been against the D-mark. Immediately following the introduction of the euro it remained remarkably stable for more than a year. This was due in part to the fact that the economies of Switzerland and the euro area were strongly converging and that both central banks were pursuing a similar monetary policy.
This success shows that regulation of crypto players and  Page 3 sur 5 crypto assets and more broadly of payments is one course of action where a “pragmatic” or “focused” multilateralism can, and must, still deliver. To avoid further payments fragmentation, there are two imperatives: (i) let us keep coordinated. I am sometimes impressed by the growing number of international bodies which play in the “crypto-regulations” orchestra; we need a strong, single conductor, and that should be the FSB (ii) let us implement in all jurisdictions. The current moment calls less for further global reflection or ever refining of taxonomies of financial tokens, and more for decisions and the monitoring of basic, consistent and robust national regulations. II. Central banks have their own driver’s seat in innovation Digital technologies are profoundly transforming finance: from artificial intelligence, API and mobile apps for the development of open banking and of the “banking-as-a-service”, to distributed ledger technology and smart contracts. We are certain to see a significant development of tokenised and decentralised finance. In such a context, our stance at the Banque de France is both to support regulatory reforms and to play an active innovative role. The Banque de France has been using blockchain for several years now. In 2017, we were the very first central bank worldwide to implement a blockchain solution to manage, together with commercial banks, a repository of creditors.

Bodies such as AAOIFI, 3 IDB’s Islamic Research & Training Institute, and Malaysia’s International Shariah Research Academy (ISRA) have made significant efforts to narrow the differences in acceptability of Shariah compliance. The Islamic Financial Services Board (IFSB), in conjunction with international standards setting bodies such as the Bank of International Settlements (BIS), IOSCO 4 and IAIS5 and various regulators from Islamic and conventional jurisdictions, are also formulating international standards and best practices for the industry. Islamic finance is also seeing increasing interest in Asia. We are seeing financial institutions leveraging on the strengths and expertise that have been developed in both Islamic and conventional financial markets. This is expanding the range of Shariah-compliant products and allowing the Islamic finance industry to tap on broad and deep investor pools globally and in Asia. •  Malaysia is widely recognised as a leader in Islamic finance, in particular for the issuance of sukuks. •  Islamic finance is also seeing growing interest in other Asian financial centres such as Singapore, Hong Kong and Tokyo. •  Just recently in mid-November 2012, institutional and private investors in Singapore and HK were the largest investors in the $ billion global sukuk issued by the Abu Dhabi Islamic Bank (ADIB).
It also reflects the Bank’s desire to accelerate the development of the industry and promote its continuous renewal by making it easier for qualified individuals to offer their expertise and services, thereby expanding access for the public to financial advice while continuously raising the bar in innovative solutions for those seeking advice. We believe the new capital requirement strikes a better balance between the traits that we want to nurture within the industry and the financial commitment that remains important to ensure that those who we license are invested in the development and success of their firms. The Bank, in close consultation with AFA as well as the Malaysian Financial Planning Council (MFPC) and Financial Planning Association of Malaysia (FPAM), has also reviewed and agreed to an expanded list of minimum qualifications to become a financial adviser’s representative. The review identified four core areas of knowledge – namely financial  BIS central bankers’ speeches  1  planning, risk management, insurance planning and investment planning – which are considered essential to equip a financial adviser’s representative to provide proper advice on insurance or takaful solutions. These areas have been preserved under the expanded list of minimum qualifications, while allowing greater flexibility for other qualifications to be included. This change has halved the cost and time required for individuals to attain the qualification requirements.

We will continue to set a high bar on professional integrity and quality of advice, and we welcome your ideas and input on how we can continue to encourage firms to grow within the industry and bring financial advisory services to a wider spectrum of the public. The Association of Financial Advisers has a very important role in this process and has been a focal point for the Bank’s engagements with the industry. I look forward to your continued cooperation in achieving our shared goal of developing a financial advisory industry in Malaysia that truly serves to improve the well-being of financial consumers in this more challenging environment, and one that we can all be proud of. Thank you very much for your attention. 4  BIS central bankers’ speeches