samchain/econo-pairs-v1 huggingface dataset:
Jean-Claude Trichet: The euro after two years: European competitiveness in a globalized global world Speech by Mr Jean-Claude Trichet, Governor of the Banque de France, to the Swedish National Committee of the International Chamber of Commerce, Stockholm, 6 April 2001. *  *  *  Ladies and gentlemen, it is a great pleasure and an honour for me to be invited to speak at this meeting of the Swedish National Committee of the International Chamber of Commerce, today in Stockholm. I am particularly happy to express my views on the already successful existence of the euro and Monetary Union, and the conditions and prospects for its further success. As you all know, within nine months, on 1st January 2002, the euro will become a reality across Europe as euro banknotes and coins are introduced. This will be the largest monetary change over the world has ever seen. However, it should be recalled that for all economic, monetary and institutional purposes, Monetary Union was created on 1st January 1999. Then, a decisive event in the history of Europe occurred. The euro was born and the irreversible nature of this change has convinced an increasing number of economic players that the success of the euro is necessary for Europe. It is a keystone of the European single market, which will ensure prosperity in Europe for the benefit of the rest of the world.

In recent weeks, the yields on German sovereign debt have on a few occasions started to move together with the yields of the periphery...  g.  Let’s turn our attention from clear fiscal solutions to monetary solutions and other ideas. Currently a lot of plans are being motivated by the idea that a eurozone-wide political commitment to a long-term plan for a deeper integration project is going to stabilize the markets. I will neglect the fact that to many observers these plans look like better or worse masked commitments to significant future fiscal transfers within the eurozone and that the markets are rather skeptical about Europe’s long-term projects. After all, the eurozone was one such project. In addition, the route to even the earliest targeted dates – in the second half of this decade – takes in one or more elections in most of the countries in question. Perhaps the markets would appreciate  2  BIS central bankers’ speeches  a nearer-term plan, one that signals, for example, that political players are willing to shift the voting powers on some pan-European solutions to bigger economies with larger stakes and more resources to spend in absolute terms. h.  Let’s go back to Philip Coggan’s observation that a “majority in failure” breaks financial systems based on the interests of savers. There are seven clearly conservative creditor countries in the eurozone: Estonia, Germany, the Netherlands, Finland, Slovakia, Austria, and Luxembourg. Seven is some way short of a majority in a group of 17.
Against the backdrop of this substantial easing of financing conditions, domestic demand has become the mainstay of growth in the euro area, making the recovery more resilient to developments overseas. Real GDP growth is projected to remain above potential growth in the coming years. The strength and resilience of the recovery tends to foster our confidence that reflationary forces will gradually support a return of headline inflation towards a level that is below, but close to, 2% over the medium term. But inflation dynamics continue to be subdued. After hovering at levels well below 1% for three years, with occasional dips into negative territory, euro area headline inflation edged higher towards the end of last year and stood at 1.4% in October according to Eurostat’s flash estimate. Owing to energy-related base effects, headline inflation rates are likely to temporarily decline towards the turn of the year. At the same time, measures of underlying inflation have ticked up moderately since early 2017, but have yet to show more convincing signs of a sustained upward trend. Muted wage dynamics are one important element keeping underlying price pressures subdued. These are shaped by many factors. In addition to weak productivity developments, the significant degree of remaining labour market slack is limiting wage growth. When assessing slack, it can prove worthwhile to also look at broader measures than the unemployment rate.

3 See the ECB’s euro area bank lending survey, October 2017, and the ECB’s Survey on the Access to Finance of  Enterprises in the euro area, October 2016 to March 2017. 4 See the box entitled, “Assessing labour market slack”, Economic Bulletin, Issue 3, ECB, 2017. 3/3  BIS central bankers' speeches
•  This means that you will be able to make payments through FAST as long as you know the payee’s mobile number. BIS central bankers’ speeches  3  •  May I suggest to the industry to go one step further and explore an “all-in-one” addressing system? •  This means being able to pay someone through FAST using also the payee’s email address, social network account, or other proxies. Unified Points-of-Sale Let me move on from card issuance to card acceptance. In Singapore’s retail payment scene, multiple Points-of-Sale (POS) terminals at the payment counters are a common sight. They are a source of clutter and inconvenience. And as more stores and restaurants introduce self-checkout facilities to improve productivity, these multiple terminals have become a source of confusion as well. Our vision is a unified POS – a single terminal, preferably mobile, that can read all kinds of cards. This will: •  allow merchants to enhance efficiency by simplifying front-to-back process integration; and  •  enhance the shopping or dining experience of customers. A unified POS requires merchant acquirer systems to be able to communicate with one another. This interoperability can be achieved through standardisation. The technology exists but it requires some effort and some cost. I am pleased that The Association of Banks in Singapore has formed a working group to look into standardising the POS applications to operate efficiently and seamlessly. I commend them for their resolve to address a long-standing bane in our retail payment scene.

The elimination of Central Bank credit to the public sector will go far to create the confidence needed to launch the crucial struggle with inflation. Central banks are responsible for keeping prices stable as well as for ensuring that the financial system runs smoothly. A stabilized financial system and stable prices are essential conditions for steady economic growth in the medium term because only a stable financial system can provide the necessary link between savings and investments. Price stability is needed to reduce uncertainties for investors and encourage investments. In the long run, stabilizing prices is likely to increase both living standards and productivity. For this reason, the price stability that is the main goal of central banks is valid and urgent not only in the short run, but also in the long run. And once countries like ours have achieved price stability after long effort, they must continue the effort to maintain it. For central banks, price stability is a permanent goal. Inflation inflicts several burdens on a society: · Overall, it introduces uncertainty into economic decisions and profit seeking. · It reduces the discipline of price and market systems. · It has negative effects on the cost of capital. · It directs resources to unproductive activities. In periods of high inflation, investments in real estate and financial investments become more desirable. · Growth declines as inflation rises. In countries with high inflation, it has been observed that most resources are directed to the financial system.
And indeed, based in part on the pattern of past revisions, the MPC does think that the current and recent level of measured output is more likely to be revised up than down (Chart 3).6 But such revisions are likely to provide only a partial explanation of the productivity puzzle. For example, if GDP were to be revised in line with the path the MPC judge most likely, that would account for only around one fifth of the 9% productivity shortfall.7 If labour hoarding and data revisions provide only a partial explanation of the recent sluggishness of productivity growth, what else might account for it? Difficulty of extrapolating from the past The second explanation is that it might be misleading to extrapolate from previous trends when gauging the extent of the productivity puzzle. The past is not necessarily a good guide to the future. In particular, there are reasons to think that past productivity growth in both the energy extraction sector and the financial services sector may provide a poor guide to more recent trends in underlying growth in those sectors. In the twenty years prior to the financial crisis, productivity in the energy sector grew at an average annual rate of over 3%. But the pace of productivity growth slowed markedly in the past decade or so as North Sea oil fields aged and energy extraction became more difficult. Indeed, since the mid-2000s, productivity has actually been falling (Chart 4).

More  11  The impact on the physical capital stock would be compounded to the extent that the recession also weighed on the growth in human capital. In particular, employees ability to “learn by doing” on the job or through job related training is likely to have been reduced as a result of the decline in average hours during the recession. Weale (2010) suggests that the learning by doing channel could eventually reduce aggregate labour productivity by around ½%. 12  “Investigating the characteristics of patents and the businesses which hold them”, Thomas, A., Economic and Labour Market Review, April 2011  BIS central bankers’ speeches  5  generally, the amount of management time devoted to raising finance and managing banking relationships has increased very substantially, diverting attention from the search for new products and new markets. It is impossible to quantify with any precision the effect that strains within the banking system have had on the growth of productivity over the past few years. But evidence from previous periods of financial turmoil suggests that the effect might be material. In particular, research by the IMF suggests that persistent falls in TFP growth following banking crises can account on average for around one third of the loss of output seen following such episodes (IMF 2009). So where does all this leave us? As I warned you upfront, I don’t think there is a single, simple explanation for the recent surprising weakness of productivity. Some of it may well get revised away.
Conversely, the scope of the European exercise will be much broader, including in its adverse scenario shocks – both at the level of the global economy and at that of each national economy – that affect all types of exposures, including the sovereign debt portfolio. All told, Spanish banks’ starting position ahead of the new exercise can generally be confirmed as relatively favourable, if we consider the disposals of problem assets, especially by the most vulnerable banks, the recognition of impairment of the assets most affected by the crisis and the sizeable increase in all banks’ loss-absorption capacity. 4. Beyond the analysis exercise  In any event, the exercise will, irrespective of its final result, be a good opportunity to reflect on the relative strengths and weaknesses of the Spanish banking sector. And this can provide a platform for banks to take strategic measures enabling them to strengthen their competitive position in the new institutional framework. In this connection, the regional diversification of the major banks – following a model of stand-alone subsidiaries, in terms of both capital and liquidity – has clearly been an advantage that has enabled them to soften the impact on their profits of adverse but not synchronised macroeconomic developments in different economic regions. Also worth highlighting is their proven capacity to obtain high levels of profitability in the retail business and to maintain the value of franchises, despite the shortcomings evidenced in the selling of loan and deposit products.

3.1  Money supply and its constituents  Money velocity is forecasted to be relatively stable during 2004. This assumption is based on keeping up the monetary developments trends of 2003 even for 2004. Thus: •  Inflation is expected to be within the target of the Bank of Albania  •  Interests rates are expected to be stable or in downward trend  •  The government demand, which is also the main source of requiring funds, is expected to be at the same level, 2.7 percent of the GDP  •  The growth rate demand for the economy is expected to be almost the same as the 2003 one. Based on these considerations, the M3 circulation velocity - as to trimesters - is presented as follows: Table 3. Money circulation velocity in 2004. (GDP as to trimesters*100 / M3) Dec '02  March  June  42.9  43.9  43.9  September Dec '03 42.9  42.9  March  June  44.1  43.3  September Dec '04 43.2  43.1  Based on this forecast, the money supply is expected to grow by 10.6 percent or by Lek 47.4 billion. 3.1.1  Money supply constituents  The ratio of money outside banks versus the money supply noticed during 2003 is not expected to undergo significant changes during the coming year. However, an upward trend of the foreign currency deposits ratio versus M3 is expected, bringing about a decrease of the Lek deposits weight versus money supply.
Input-output data suggests that goods are between two and three times more import intensive than services. The implied contributions of import prices to inflation under these two assumptions are shown in Chart 8, with import prices contributing between 2 and 3 percentage points to inflation in late 2009/early 2010. Back in 2009, our central view, embodied in successive Inflation Report projections, was for inflation to oscillate around the 2% target over the next couple of years, with the upward pressure from sterling’s depreciation very broadly offset by the downward pressure from spare capacity and additional volatility induced by the restoration of the crisis-driven cut in VAT. That view was predicated on a considerable body of research, for this and other countries, which suggested that the pass-through of exchange rate movements into consumer prices had fallen in the past two decades 6 . That research pointed to better anchoring of inflation expectations as one possible cause, coupled with an increased tendency to “price to market”, meaning that more of exchange rate movements were absorbed in either profit margins or in other costs, rather than being passed on into prices. In the event, the pass-through seems to have been rather larger, and closer to that seen prior to the Great Moderation. In part, that may reflect the recognition by market participants and businesses that a substantial decline in the real value of sterling was necessary to re balance the economy and the fall was consequently likely to be permanent.

Unlike commodity prices – and world prices more generally – over which the United Kingdom has no direct control, an exchange rate represents the relative price of two currencies and is thus affected by monetary policy decisions at home and abroad. The timing of the depreciation, however, and its subsequent relative stability makes it natural to attribute the fall not to changed expectations of monetary policy at home and abroad, but rather to the perceived real impact of the crisis on the UK economy. Prior to the crisis, the United Kingdom was consistently running a moderate current account deficit. At some stage, that deficit needed to be closed, most probably through a higher national savings rate. The natural counterpart to that would be a real depreciation of sterling in order to improve UK international competitiveness, boosting net exports and leading to a re-balancing of the composition of output away from meeting domestic needs and towards internationally tradable sectors. Moreover, the crisis has probably also resulted in a loss in net foreign earnings by some parts of the financial sector, necessitating an even larger decline in the real value of sterling to re-balance the economy. In order to get a handle on the likely impact of the depreciation of the exchange rate, we can follow a couple of approaches. One approach is to compare inflation rates here with those in other jurisdictions with stable exchange rates.
4. Conclusion  We are under no illusions. The Great Recession was a calamity. Britain’s workers have borne many of the consequences. Our job is to ensure the economy achieves its potential and to maintain price and financial stability, for sustainable growth in jobs and incomes. But monetary policy cannot do it alone. Others – including trade unions, government and businesses – will determine the potential of this economy. You will ultimately determine the size of Britain’s pay rise. BIS central bankers’ speeches  9  Those in work need to be able to seize new job opportunities in a world where technology and globalisation cause labour markets to shift rapidly. Skill levels need to be raised continually. That is of course first and foremost about education. But crucially it also means access to lifelong learning, both on and off the job, available to all. The TUC’s engagement with the UK’s skills agenda is a major contribution to realising that imperative. In the past year alone, unionlearn, has supported over 200,000 people to invest in their skills. Such investments are crucial for the durability of this economic expansion and for Britain’s future. They will help to deliver long-term productivity – so that the British people get the pay rise they deserve. 10  BIS central bankers’ speeches  Chart 1: UK unemployment rose by less than in the US initially and fell more rapidly than in the euro area subsequently.

18  See Barnett, A, Batten, S, Chiu, A, Franklin, J, and Sebastia-Barriel, M (2014), “The UK productivity puzzle”, Bank of England Quarterly Bulletin, Q2, for an analysis of the UK’s “productivity puzzle”. The standard view has been that the UK has suffered from a collapse in the underlying growth rate of productivity. On that basis, we would not expect there to be significant scope in future for either productivity or real wage growth. The interpretation of the recent behaviour of the labour market as a labour supply shock has more positive implications for the future. 6  BIS central bankers’ speeches  3. Monetary policy implications  One of our roles at the Bank of England is to deliver price stability in a way that supports jobs and growth. Our price stability objective is clear: the inflation target of 2% CPI inflation. Supporting jobs means helping the economy reach the maximum sustainable level of employment. That level changes as the economy changes. That is why, a little more than a year ago, even though inflation had been above the target for most of the past five years and economic growth was poised to accelerate, we did not raise interest rates from their historic low level of ½%. We did not because we recognised that the UK had a huge number of unemployed and under-employed workers and that the economy was running below full capacity. We expected inflation to fall back. We saw that confidence might have been returning, but it remained fragile.
We wish to support your efforts to enhance the adequacy of capital in a manner that conforms with your institutions’ risk profiles, strengthens the management of risk, and fortifies the stability of your financial systems. Concluding thoughts on the New Accord Clearly, all of us have come a long way since 1988, regardless of whether we were the first or simply the most recent supervisors to adopt the original Accord. As we develop new approaches to capital adequacy, none of the milestones we’ve achieved, and none of our success in resolving open issues, would have been possible without the dedication that you, the members of the global supervisory community, have demonstrated. You have been enormously supportive of our work and have undertaken considerable pains to share your views and ideas. The members of the Committee and I are particularly grateful to our friends and colleagues in the rest of the supervisory community for your advice and counsel. We know that none of us will be able to claim individually the success of the New Accord as our own. Instead, it is dependent on all of us to work hard and promote the virtues and benefits of the New Accord in our own countries. Press releases and some encouraging words from supervisors will not suffice. Success will demand our mutual and dogged determination to encourage our banks, to prepare our staff, and to cooperate with each other.

I believe that the differences between domestic banking systems make it impossible to conceive of a single capital Accord that would be appropriate for all banks in all countries. Rather, supervisors may need to consider different approaches. For some, retention of the current Accord, supplemented by  6  BIS Review 52/2002  the second and third pillars, may be the best way forward. Other countries may elect the revised standardized approach of the New Accord. Still others may seek a hybrid of these two possibilities. We should recognize that these might be perfectly valid choices for the treatment of non-complex domestic banks, depending on national circumstances. Attempts to force a uniform approach on such banks that typically do not compete across national borders are unnecessary and possibly counterproductive. Instead, our energy would be better spent on sharing ideas and developing a common understanding of the challenges that supervisors face in dealing with noncomplex domestic banking organizations. Accordingly, at its meeting yesterday, the Basel Committee agreed to launch an initiative jointly with supervisors from many other countries to consider these issues and to develop practical guidance for supervisors on the issues associated with the capital regulation of smaller, non-complex banks. Let me be very clear. The purpose of this initiative is not to develop one or even several specific "Basel-approved" approaches to such regulation. Rather, we wish to provide practical assistance to supervisors confronting the challenges ahead to develop an appropriate regulatory framework suitable for their national circumstances and domestic banking systems.