samchain/econo-pairs-v1 huggingface dataset:
BIS central bankers’ speeches  11  The future role of the central bank is taking shape Allow me to conclude by highlighting certain aspects that are important to central banks in terms of creating a framework that continues to safeguard stable prices while at the same time being consistent with sustainable development in the financial system. First, monetary policy should continue to be conducted in the framework of flexible inflation target policy, with price stability as the overriding target. However, the financial crisis has brought to light the importance of monetary policy taking greater account of financial stability. It can be a case of extending the time horizon of the monetary policy analysis, and focusing on price stability over a longer period than just the next few years. Second, financial stability policy requires a new focus, and macroprudential policy is emerging as a new policy area. Macroprudential tools provide better opportunities to strengthen the resilience of banks and other financial institutions to various shocks. They also provide better possibilities of influencing bank lending rates and thus macroprudential policy becomes closely interconnected with monetary policy. Overall, this enables us to work to a greater extent towards achieving a sustainable development in both lending and economic development. Having more tools also facilitates managing the conflicting objectives encountered by central banks, even though there will always be difficult trade-offs. So, there is good reason to give central banks an influential role in macroprudential policy.

An inflation target was adopted and the krona was allowed to float free. In Norway, the situation was somewhat different. The Norwegian krone had not depreciated as much when Norway left the exchange rate mechanism. Norway therefore returned to a fixed exchange rate regime, although this regime gradually changed and in 2001 Norges Bank also formally adopted an inflation target and a new fiscal framework was introduced. So our two countries have had a similar strategy for monetary policy based on an inflation target and a floating exchange rate since 2001. During this period there have been frequent and deep contacts between our staff, and I am thankful for all that we at Sveriges Riksbank have learned from these exchanges of methodologies and other experiences. However, the emergence of Norway as an oil nation has made Norges Bank unique in many respects, not least in managing a sovereign wealth fund. Norges Bank is one of very few central banks charged with such a task. In fact, this fund is one of the largest investors on the Swedish stock exchange. When Norway became an oil nation in the 1970s, the country started its journey to become one of the richest nations in the world. We Swedes have some-times been a little envious of this, and perhaps even thought it was a shame we no longer have the union! Huge oil revenues also create major challenges, and many countries have not managed so well. But Norway has.
Financial Stability: Parallel Processes  Recognition of these three “must do” areas is a starting point in deciding the scope of our financial stability work and in enabling us to fulfil our MoU mandate. But it does not provide a clear steer on what we actually have to do to carry out our functions efficiently and effectively. Regarding long term thinking, which might one day lead to an analogue to monetary policy, we are undertaking a research project. This is separate from our day to day activities where a set of organising principles can be used operationally to handle today’s issues. i)  Research and Development: Creation of an Analytical Framework  The research project is an attempt to devise an analytical framework as an analogue to that in monetary policy: to help clarify some of the differences I outlined earlier and to provide greater certainty and focus. As with the development of monetary frameworks, this will be a medium to longterm endeavour. This may sound overambitious. But even modest achievements towards it would enhance understanding of what financial stability oversight is about, and what our priorities should be in seeking to ensure it. And so it could assist our quest for clearer accountability and more transparent governance arrangements. This quest gets to issues such as how to define our financial stability objective, how to articulate indicators of financial stability, and how they relate to each other.

Given the extensive consolidation of firms in the financial industry, the information systems of many firms are an accretion of systems, with issues of consistency, comprehensive aggregation of exposures and speed of information retrieval for analysis. For example, most firms in distress find it difficult to answer a crucial question: what market participants are most exposed to me and how will they react to my difficulties? A second impediment is the complexity of unwinding certain books of business, where the business is originated in one location, recorded in another and risk-managed in a third. Derivative transactions are a prime example. The level of complexity related to how and where trades are marketed, booked, funded and risk-managed leads to high levels of connectedness within the firm, particularly as institutions book “back-to-back” intragroup trades to transfer the economics of a transaction to a central portfolio for risk management purposes. The third impediment is the use of intragroup guarantees. Institutions sometimes use parent guarantees to support and cover particular transactions or the entire operations of separately capitalized subsidiaries in foreign countries. Guarantees of this sort allow firms to operate subsidiaries with less capital, but can distort the pricing and economics of the subsidiary’s business activities and make the subsidiary more valuable to the current owner than to a potential buyer. In addition, the default of a guarantor may allow counterparties to terminate contracts and seize collateral even though official sector efforts are attempting to preserve the local operations. The fourth impediment is the need to preserve global payment operations.
Back in 2001 the Governing Council of the ECB, on the basis of a proposal coming from Tommaso Padoa-Schioppa, issued a short paper lining up the arguments for having supervision in a central bank. And if you read that paper, you will see that the set of arguments is heavily tilted towards favouring giving supervision to central banks. So it’s a long-standing position.1 There are many advantages, including one that is not mentioned in the paper: supervision is not just about micro-supervision these days; it now has a macro-financial perspective, for which central banks are much better prepared than any other institution to handle. Central banks monitor developments in all segments of the financial system. From reading your most recent speech, I had the impression that you thought austerity went much too far and the effects have been too drastic. Is that right? 3/8  BIS central bankers' speeches  Yes. And the main example of that is of course the case of Greece. No institution, not the Commission, not the ECB, not the IMF, ever thought possible – let alone planned for – a 25% drop in GDP in Greece. The first and second programmes for Greece were designed with a much more optimistic view on the cost of the adjustment. So the adjustment programme was indeed too harsh. And also perhaps too mechanical, because what the programme didn’t foresee was the total collapse of hope and expectations. Then, at the same time, all countries in the euro area were reducing deficits, consolidating.

Governments showed a strong commitment to reduce systemic risk by saving important financial institutions, by providing guarantees for inter-bank lending, by raising the level of deposit guarantees for the public etc. Such measures, most of the times designed as temporary, appear to have been successful in restoring the market confidence and steering the world economy back in the gradual recovery path. Focusing on the financial markets and institutions in the aftermath of the crisis, a number of issues, previously known but many times neglected, have re-appeared forcefully to request a serious and thorough response by the authorities. Many of these issues relate to the financial activity itself, others are connected more with the surrounding economic environment. It can be said now that the supervisory authorities of the financial markets and institutions are partly responsible for what happened. Despite the rhetoric, they failed to properly and timely  BIS Review 139/2009  1  identify and control the risk in the financial industry. Here one can mention the soft-hand on bank wholesale borrowing that financed the foreign currency credit in a certain jurisdiction, the neglect for the special purpose entities that were created to by-pass balance sheet prudential requirements etc. There are many reasons for this weakness and a number of them, in my opinion, go beyond the legal and resource capabilities of the supervisory authorities to act. On their own, the supervisory authorities were wrong in basing their work on the misconception that strong individual financial institutions are sufficient for the entire financial system stability.
At the same time, more prudent transformation ratios (say, loans to deposits), coupled with a lower capacity of banks to attract savings would imply, at least in some countries, that the ability of banks to lend would decrease; but their willingness would not necessarily decrease, since they keep the advantaged standpoint to screen and monitor loans. This means that the implied gap might be filled by actors (insurance companies, pension funds) with greater capacity to attract savings although with limited capacity to lend directly. Securitisation of bank loans can be the privileged vehicle through which the gap is filled. Securitisation is also key when one thinks at impediments to capital relief and at tools to decrease the perilous geographical concentration of assets in banks’ balance sheets. In fact, if the right incentives are given, securitisation markets are the best way to more rapidly guarantee that loans are available for capital markets to invest while decreasing the home bias in banks’ balance sheets and ensure that credit is channeled to the best projects at the minimum cost. That is, securitisation could also have a decisive role in the integration and deepening of European financial markets, by allowing the transfer of risk from the originator to investors of any type located in other jurisdictions, in the context of a still very fragmented banking sector, lacking for instance relevant pan-European banks.

If the problem is supply we know for sure one thing: fewer firms will have access to credit, some will be in trouble and will fail due to this fact; after many of these firms fail one can naturally state that there is no demand for credit. That is why it is so important to take care of supply problems. In doing so, policy mistakes should be avoided. It would be a mistake to simply state that a major policy target is to restart funding. That would be relatively easy to achieve, by the way: by funding expensive projects with public funds, independently of their quality. It would also be a mistake to try to boost artificially any specific financial instrument. Instead, the route towards a better financial system is one characterized by a level playing field for all types of finance, with specific choices left to borrowers and savers. The tax system should also not discriminate, i.e., it should treat symmetrically equity and debt, so that firms decide on the funding source regardless of the tax advantage of one over the other. Creating this level playing field will most likely lead to a more balanced and diversified financial system, i.e., with more options for savers and borrowers. This competitive environment is key to maintaining financial markets in constant improvement, characterized by innovation that responds to the insufficiencies of the existing instruments. Ideally, restrictions to the development of any type of finance should always be clearly justified on efficiency grounds.
Joseph Yam: Developing and positioning Hong Kong’s bond market Speech by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the Forum on China’s Government Securities Market in the New Century, Hong Kong, 19 November 2001. *  *  *  Introduction It is a great pleasure for me to be here today to share with you Hong Kong’s experience in the development of the bond market and our views on the future prospects of that market. Before I go into the subject, however, I would like to congratulate our friends from the Mainland on their superb efforts leading to China’s accession to the World Trade Organisation. The signing of the necessary documents a week or so ago marks the successful conclusion of 15 years of sheer hard work and determination, and the beginning of a new era in which the Mainland embraces globalisation in earnest, to the long-term benefit of China, the region and the world. I have no doubt that Hong Kong, in particular, will benefit tremendously from this. The international business community has been positioning itself, here in Hong Kong a free and open economy at the doorstep of the Mainland and an integral part of China to take advantage of the many opportunities that will open up in the years to come. As the international financial centre of China, Hong Kong is particularly looking forward to the opportunities arising from a much quicker pace of financial liberalisation in the Mainland after accession to WTO.

However, supplementary training may need to be constantly kept up to date, in order that the Management Accountant has a meaningful impact on the organization. This would be made even more difficult because issues, problems and responses are no longer of a local nature. In most cases, responses need to be regional or even international. If we act together we can pool our resources, learn from our experiences and be ready for the unknown. That is what we need to be doing. In that sense, the Management Accountants of the world, seem to be on the right track. We say, we wish to be seen as Strategists and as Performance Management Specialists. If so, what should we do? (a)  As far as education and training is concerned, in addition to all what we learn now, a greater focus in communication and human resource management may be necessary. These new skills would be the tools to; (i) manage better, (ii) perform better, and (iii) deliver outputs better. (b)  Develop skills in marketing and understand the importance and the specialist nature of the subject. (c)  Develop the proper managerial attitude which focuses on outputs rather than inputs. If a person is to focus on “outputs” a few important steps would need to enter his work and life. These are very well enunciated in the 2500 year old teachings of Lord Buddha. Usually, we seek the guidance of this Great Teacher in spiritual matters.
Individual banks do not have an incentive to take into account a fall in value that it inflicts on its counterparties. Contagion effects are externalities between banks that can lead to a situation where the risk in the financial system becomes greater than the sum of what individual banks believe their risk to be. Over the past years, I have travelled around the country and visited many savings banks in Norway, and without exception they report that risk management has improved considerably at their banks. That is no doubt true, but I cannot without a doubt conclude on that basis that systemic risk has been fully eliminated. Herd behaviour amplifies risk in the financial system. The more banks’ portfolios are alike, the more they are exposed to indirect contagion through a fall in the market value of their portfolios. When banks have similar portfolios, they are also vulnerable to the same external shocks. The banking system as a whole becomes vulnerable. The assumption that banks are intertwined and alike can lead to problems spreading between banks through expectations alone. If depositors see problems in one bank, they will run to their own bank and withdraw their funds before it is too late. Paradoxically, banks become more alike when they apply the same diversification strategies. The savings banks I mentioned may have become more alike if they are using the same risk management systems. That banks become more similar may also be a sought-after result on the part of banks. They may want to move in herd.

Today, our mission is still to promote the good of the people of the United Kingdom, but now we do that by maintaining monetary and financial stability. Let me explain what that means. Maintaining monetary stability means two things. First, providing banknotes that you can use and trust. We have over 3 billion notes currently in use, and they are used in 44% of all transactions. Second, it means maintaining low and stable inflation. Maintaining financial stability means three things. First, making sure that when you put your money in a bank it is safe. Second, it means that if a bank fails, the costs fall on the bank’s investors and senior management, not ordinary people with deposits in banks. And finally it means making sure that if you take out an insurance contract, it will pay out if whatever you are insuring against happens. The work that the Bank does in all of these areas can ultimately be summed up very simply: we maintain confidence in money. This confidence is not, though an end in itself; it is a means to an end. Confidence in money provides the foundations for prosperity. Without it, companies would struggle to provide the goods and services we all use every day; you would face difficulties in knowing how to invest for your futures, be it financing studies or buying a house. Maintaining this confidence is the best contribution the Bank of England can make to the good of the people of the United Kingdom.
51  17  All speeches are available online at www.bankofengland.co.uk/speeches  17  These extraordinary monetary policy measures have been an important factor supporting growth in the UK since the global financial crisis. Without these measures, we estimate the economy would have been around 53  8% smaller and unemployment 4 percentage points higher. Highly accommodative monetary conditions  have helped maintain UK growth at steady, if unspectacular, rates for the past six years. Recent data suggest UK growth continues to be steady, at or around its trend rate of roughly 1.5% per year. At the same time, the labour market has continued to perform strongly. Almost 3 million new jobs have been created over the past six years. The unemployment rate in the UK, at 4.2%, has fallen to its lowest levels in over 40 years. Measures of tightness in the labour market have picked up notably. And the Bank’s estimates suggest little or no slack remains in the economy. Consistent with that, and despite undulations in shorter-run measures, we have seen a steady pick-up in annual rates of wage inflation over the past 18 months, as well as in pay settlements. Private sector regular pay growth has risen from around 2% this time last year to just shy of 3% currently. And average pay settlements of around 2% last year have picked up to around 2.5% this. Surveys of pay and recruitment difficulties, including from the Bank’s Agents, have gone up a gear comparing this year with last.

José De Gregorio: The international financial crisis and its impact on the Chilean economy Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, presented before the Honorable Senate of the Republic, Santiago de Chile, 8 October 2008. *  *  *  Mr. President of the Senate, In response to your invitation to participate in this special session of the Honorable Senate, I would like to share with this audience our vision on the severe financial crisis the world economy is enduring, as well as its implications on our country. The world financial crisis and international growth The financial crisis being experienced by developed countries is the outcome of a period of stability, with abundant liquidity, fast economic growth and an asset price bubble. This combination of aggregate factors yields, as it frequently happens, to a cycle of high credit growth. The problem is that this occurred during an extremely accelerated process of financial innovation in market segments that were poorly or ambiguously regulated – mainly in the US. Low interest rates prompted an intense search for higher returns. Individuals with little or no ability to repay were lent for housing and, to reduce risks, credits were securitized and often taken out of the banks’ balance sheets (i.e. Structured Investment Vehicles and conduits). Money was lent on the assumption that housing prices would continue on the rise, so the mortgage was all that was needed to relax lending standards.
So you may be reassured to hear that we spend most of our time worrying about the risks that could throw the UK economy off course; and arguing about how to respond appropriately. So what are the main risks facing us now? Last year saw the fastest growth in world output in three decades. We expect growth this year to be less spectacular but still robust. But while the US and China are still expanding strongly, growth has showed signs of faltering in Japan and, to a lesser extent, in our major overseas market, the euro area, and especially Germany. We think this weakness is likely to prove temporary, but we could be disappointed. Unbalanced growth creates strains. The US has a large current account deficit, which is mirrored by surpluses in the other major trading blocks. The risk is that a better balance will only come about through sharp adjustments in exchange rates and a marked increase in US savings, which may cause a slowdown in global activity. Closer to home, there is uncertainty about the near term momentum of household spending, by far the largest influence on domestic demand. While it is difficult to be confident about the path of retail sales since the autumn, there is little evidence of much underlying buoyancy. Retail sales are not the whole story, and our central view is that any weakness in consumer spending is likely to be temporary. But we could easily be wrong.

Along with the ongoing monetary policy normalization in the US economy, the new US fiscal package and its impacts on the economy also absorbs attention. In the EU, as already clearly announced, the accommodative monetary policy, although with lower amount of assets purchase, is expected to apply by September this year or beyond and interest rate changes to take place later. However, the positive global outlook has still been surrounded by various risks, including the still pending outcome of Brexit negotiations, geo-political risks and the possible protectionism measures by the US administration. However, besides the sound and wide spread recovery, an important feature of the global environment is the generally subdued inflation, not always in line with the model-based forecasts and standard empirical findings. In this view, the flattening of the Phillips curve based on current economic data, points to possible altering of the standard relation between the economic cycle and inflation, raising discussion on one of the basic empirical findings in the macroeconomics in the academic and central banking community. The subdued inflation nowadays is mainly due to global factors that are not exclusively related to the commodity prices fluctuations, but also to the impacts of the globalization of production and digitalization of trade worldwide, both having impact on competition and prices in each economy. In such surrounding of prolonged lower inflation, the re-assessment of the time lag in affecting the inflation as well as the inflation measurement, the outlook of inflation expectations and their possible de-anchoring are to be considered.