samchain/econo-pairs-v1 huggingface dataset:
William C Dudley: The national and local economic outlook – an update Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the University of Bridgeport, Bridgeport, Connecticut, 8 April 2016. *  *  *  Jaison Abel, Jason Bram, Tony Davis, Richard Deitz, Jonathan McCarthy and Joseph Tracy assisted in preparing these remarks. Good morning. I am very pleased to be in Bridgeport and to speak with you today. I would like to give a special thanks to the University of Bridgeport for their part in making this event possible. My visit today is part of our ongoing efforts at the Federal Reserve Bank of New York to better understand the regional economy. We plan trips like this so that we can meet with a diverse array of stakeholders in the region to gain insights and perspectives on the local economy. These trips also allow us to hear from Main Street about the major issues and concerns affecting people and businesses in the area. Fairfield County is our first destination in 2016, and this is the second time we have visited the area in the past three years. I am looking forward to meeting with a number of different groups today. After starting our day here at the University of Bridgeport, we will meet with an organization called The WorkPlace to hear about some of the nationally-recognized programs they have successfully developed to help the long-term unemployed find jobs.

The current number of long-term unemployed is still higher than the prior cyclical peak in June 2003, and is more than a million above the prior cyclical low in October 2006. Further progress on transitioning these unemployed workers back into jobs requires sustained effort on many fronts. Essential to this effort are programs such as the Platform to Employment developed by The WorkPlace. I am looking forward to my visit there later today to hear more about this program. The Platform to Employment program has been replicated in nearly 20 communities across the country from Newark to San Diego. Helping the longterm unemployed regain employment needs to be a priority for all of us. The ongoing challenge in reducing the number of long-term unemployed is also a reminder of the importance of financial stability and sustainable economic growth. Recessions can quickly undo years’ worth of hard-earned progress in the labor market. Making the financial system and the economy more resilient so we can avoid such deep downturns in the future is a responsibility that I take very seriously. Local economic outlook Turning now to the region, while Fairfield County’s economy has recovered from the Great Recession, its job growth has lagged behind both New York City and the nation. Only recently has employment approached its pre-recession levels, and it is still well shy of where it was back in 2000. Other barometers of the Fairfield County economy, such as home prices, also indicate a slow recovery from the recession.
The reason for this is that a significant part of firm-specific variation in productivity is absorbed by firms in their profits or reflected in their prices. The reason is that firms’ profits and prices absorb a significant part of firm-specific variation in productivity. Many of the workers in the more productive tail of firms are being underpaid relative to their average productivity, which results in frontier firms making a larger profit share. The opposite is the case at the other end of the productivity distribution. 55  For example, Furman and Orszag (2016) There is time series evidence to suggest a strong historical relationship between aggregate productivity and real wages. For example, Castle and Hendry, Blundell et al (2013) and Disney et al (2013). 56  17  All speeches are available online at www.bankofengland.co.uk/speeches  17  57  This analysis focusses on differences in pay across firms. But what about pay within firms? We can  examine this by tracking differences between the average pay in each company and the pay of their highest paid director. Chart 28 plots the median across firms of these series over time, while Chart 29 compares the variance of each series as well as the gap between average pay and the highest paid director. Since 1998, the variance in average pay and director pay has increased across firms, although it has fallen notably since the financial crisis. The median gap between average pay and director pay has followed a similar pattern.

Overall, this is akin to writing deeply out-of-the-money options, exposing the banking system to tail risk. That should not be too surprising given that commercial banks’ liabilities are money, and so they are in the business of providing liquidity insurance. But it does make it difficult for market participants to assess, and price for, how much risk there is, albeit contingently, in the system as a whole. Conclusion Many of the developments I have reviewed are, of course, good news. Most obviously, longer life expectancy! Greater macro economic stability; financial innovation distributing risk more efficiently – these are pretty good things too, including for you as corporate treasurers. As a result, some risks have been reduced or are now easier to manage. But risk management challenges do unquestionably remain for you as corporate treasurers. Some, such as those arising from pension provision, essentially boil down to your appetite for risk and the mix of business/financial risk you want. Others stem from a range of uncertainties in capital markets. When and how global imbalances will be resolved. Whether risk is underpriced. How still-new structured finance markets would withstand a marked pick up in defaults. You will each have your own list. Those uncertainties and risks have to be identified, priced and managed. The official sector cannot make them go away. But it is our mission to reduce uncertainties stemming from monetary policy and its implementation. Some important sources of uncertainty in the past were, in fact, avoidable.
This means that while banks will, where needed, have to hold some capital above the Basel III transaction path for the reason that I  4  BIS central bankers’ speeches  set out earlier, the FSA is allowing those banks that increase lending to a lower Pillar 2 capital buffer to recognise the benefits of such lending. I should add that the FSA has also altered its guidance to banks on the liquid asset buffers they need to maintain. This reflects the Bank of England’s stance on the potential access of banks to liquidity from the Bank, and a wider desire to reduce the incentives for banks to hold excessive liquid asset buffers for precautionary reasons. This action, too, has been endorsed by the FPC, and I hope it will support credit availability. In conclusion, I have tried this morning to set out how we are thinking about and then applying macro-prudential policy, going back to first principles. This is a new field, and as I said earlier, please bear in mind that in the early days of the low inflation monetary policy regime in many countries, it took time to refine the communication. But, beyond that, we also need to fill in what for me is the big gap at present, namely how we explain and calibrate the resilience objective in terms of capital. The FPC will focus on this at its next meeting.

Figure 1 Countries experiencing drops in real GDP in the fourth quarter of 2008 (*) (percentage of sample) 100  100  90  90  80  80  70  70  60  60  50  50  40  40  30  30  20  20  10  10  0  71  74  77  80  83  86  89  92  95  98  01  04  0  07  (*) Using the annualized quarterly GDP for a sample of 29 developed or emerging economies. Source: Central Bank of Chile. Figure 2 Monetary Policy Rate (MPR)  Change in MPR  MPR level  (basis points)  (percent)  Japan U.S. Canada Switzerland Israel Hong Kong U.K. Sweden Eurozone Chile Czech Rep. Norway South Korea Malaysia N. Zealand Australia Poland Peru Philippines India China Colombia Mexico Indonesia South Africa Hungary Turkey Brazil Argentina Russia Iceland  Chile Turkey N. Zealand U.K. India Norway Colombia Australia Sweden Israel South Africa South Korea Eurozone Hong Kong Brazil Canada Switzerland Iceland Poland Mexico Peru China Czech Rep. Indonesia U.S. Philippines Malaysia Japan Hungary Russia Argentina -800  -600  -400  -200  From 4 Sep. 2008 to 8 May 2009  0  200  0  2  4  6  8  10  12  14  At 8 May 2009  Source: Bloomberg.
This will condition declining inflation pressures of the domestic economy, expected to balance the effect of foreign and administered prices increase. 4  BIS central bankers’ speeches

In total, more than 6,000 individuals have been trained under FICS, with about 2,600 of them assessed. We now have more than 300 individuals certified under FICS. Every craft has its master craftsmen. The financial industry is no different. To this end, IBF introduced the Distinguished Financial Industry Certified Professional, or FICP. The Distinguished FICP represents the highest certification standard under FICS: it is bestowed on those in the industry who are the epitome of professional stature, integrity, and achievement. IBF is proud to have added another 15 senior industry veterans to its cadre of Distinguished FICPs in October last year. Over the years, we have developed a growing network of FICS-certified professionals. This is an invaluable resource: a community of professionals whom we can actively tap upon as partners in our learning journey – participating at industry events or in FICS working groups. It has been about five years since FICS was introduced. It is now timely for a review of the FICS Standards. IBF will be working with its group of Lead Providers to re-look the FICS Framework and the Curriculum covered by the current Standards. Please come forward to give us your views. When we met at last year’s Conference, we had indicated that IBF will study the feasibility of introducing “common examinations” for the industry. I am happy to report that IBF has since worked with the industry to roll out the Corporate Banking Common Examination.
The share of bad loans in banking portfolios also remains unchanged (sitting at 8.7%, excluding rehabilitated banks, in contrast to the previous level of 8.6%). The largest share of bad debt is to be found in the construction sector (27.3%), real estate transactions (13.5%) and wholesale and retail trade (15.1%). To a large extent, the realisation of risks in these sectors was caused by the reckless actions of not only borrowers, but also banks providing foreign currency loans to borrowers who do not have foreign currency earnings. The second point I would like to address is how banks manage risks that arise. The main tool of credit risk management for borrowers already experiencing financial difficulties is restructuring. In 2016, the Bank of Russia began collecting operational data from banks, analysis of which showed that banks actively use restructuring in their operations. The areas in which banks make concessions to borrowers are, once again, foreign currency loans to construction and real estate companies, as well as ruble loans to coal companies which faced difficulties in 2013–15 due to the decrease in coal prices. It is worth noting that the process of restructuring loans does not affect the stability of the banking sector, as the loans in question generate sufficient reserves. To summarize, I would like to note that the banking sector is entering a new phase, wherein priority will shift from active work on the debt problem to the task of finding new clients and projects for lending.

The same evening, 19 March, the Riksbank was able to publish the information that new dollar loans would be available with effect from the following week. Stefan’s telephone message was a small, but clear glimpse of light in the first weeks of the pandemic. Belonging to the narrow group with back-up from the US central bank, the Federal Reserve, regarding dollar liquidity was of central importance during the financial turbulence. The Riksbank, like other central banks, had taken a number of measures during the coronavirus crisis to manage the economic effects of the pandemic. But the number of measures also raises new questions. I would like to talk about one of  * I would like to thank Björn Lagerwall for his help with writing this speech, and Emma Bylund, Charlotta Edler,  Dag Edvardsson, Frida Fallan, Eva Forssell, Iida Häkkinen Skans, Pernilla Meyersson, Marianne Nessén, Åsa Olli Segendorf, Cecilia Roos-Isaksson, Mikael Stenström, Marianne Sterner and Anders Vredin for their help and valuable comments, and Elizabeth Nilsson for her translation of the speech into English. 1 [20]  these today, namely how one can combine the Riksbank's strong independence with accountability in monetary policy. 1 My points can be summarised as: • • • •  Our current monetary policy framework reflects a clear target, strong independence and a large measure of openness. Experience shows that our toolbox needs to develop over time. To manage our statutory task of maintaining price stability, we need considerable room for manoeuvre in monetary policy.
Weak growth in Switzerland, however, may be explained mainly by the conspicuous productivity gap between the innovative export sector and the domestic sector set in its traditional structures. The reason for this lethargy of the domestic sector is a dense network of regulations which limit competition and obstruct technical progress. The result is an excessively high domestic price level from which not only consumers but also exporters suffer. Growth-promoting measures must therefore aim primarily at wedging impediments to competition in the domestic sector. BIS Review 49/2003  1

This may sound pretty obvious, but I know that there are many of our managers who have no idea how some of our core departments function and cannot intelligently explain our role in the economy. This reflects badly on the Bank with regard to the calibre of its staff. The third point is that your understanding of core and other departments operations for that matter will facilitate staff rotation, a policy to which the Bank is commited. Finally, and most importantly, an understanding of core functions enables you to better understand and appreciate the mission of the Bank. This in turn facilitates a better understanding of the strategic plan. In closing, I wish to say that I know that the Bank has come a long way and has demonstrated marked improvements in the way that it conducts its operations and in the quality of its management. Director – Human Resources will show in his presentation on the change process in the Bank. Thank you. 2  BIS Review 125/2006
Over the same period, employment grew at its fastest rate over any peacetime decade since 1920, raising, probably temporarily, the growth rate of the supply capacity of the economy. Output growth was noticeably faster than its post-war average. Behind that expansion were three significant structural changes: one at home and two overseas. At home, there has been a sequence of reforms to the labour market which began in the 1980s and have continued since. Reforms such as the New Deal and Working Tax Credit have encouraged benefit recipients back to work. Changes to pay bargaining and a decline in the share of wage settlements covered by collective bargaining have made the labour market more flexible. Those reforms reduced the rate of structural unemployment. The two other structural changes reflect globalisation and the openness of the British economy. The first is the rise in the prices of the goods and, especially, services that we export relative to the prices of goods and services that we buy from abroad. The so-called terms of trade have improved markedly over the past decade. Countries such as China and India are now major players in the world trading system, and the prices of manufactured goods globally have fallen as a result. That has produced changes in the pattern of international trade, and in our own industrial structure. Although those changes were, and are, uncomfortable to make, they benefit us all as consumers.

Last year, non-oil import prices rose, depressing the growth of real take-home pay. And oil prices increased further. On the demand side, our central view remains a relatively benign one. The economy slowed in the first half of last year, led by consumer spending. But growth has begun to pick up. Averaging the growth rate of consumer spending over the final quarter of last year and the first quarter of this, shows that consumption growth has returned to not far off its long-run average. Export growth and business investment both seem to be recovering. So in its May Inflation Report, the Monetary Policy Committee had, as its central outlook, a return to steady growth with inflation close to the 2% target. But there are many risks and those have been bought into sharp focus by the recent financial market turbulence. And, just as for England in the World Cup, the threats come mainly from the rest of the world. The recent volatility in financial markets is reflecting the real risks which face us as, after a period of robust world economic growth, we approach a somewhat bumpier stretch of the road. A rebalancing of global demand is desirable, but the way ahead may not be smooth. One risk is that during the fastest three-year period of world economic growth for a generation, monetary policy around the world may simply have been too accommodative. In the main industrialised regions – the US, Euro area and Japan – official interest rates were very low for a long period.
Therefore, I would like to invite all other stakeholders to be open-minded and very cooperative to boost lending to the economy. First, I would suggest to the business community to be more creative, transparent and formal in its operation. It should comply with all obligations arising from the contractual relations with the banking system. This should be broadly understood and accepted. A correction is necessary in the economy, first of all implying a rebalancing of prices. There may be no reduction in non-performing loans, increase in lending to the economy, improvement in business and bank balance sheets, unless collaterals are executed and, subsequently, fix asset prices are corrected. This process would release huge financial resources that would be a vital serum of fresh money injected back into the economy. With this fresh money we must encourage the creation of new and effective initiatives that yield swift return on investment. One of the lessons learned from the crisis is that any new healthy money should go to a healthy business initiative. We need to encourage highly productive sectors of the economy. This is the only way to ensure revitalisation of the economy and make it a dignified European partner. Second, I would like to encourage the banking system to be more dynamic, by looking continuously for worth-funding opportunities. Offer reliable funding packages by assigning priority to economic health of the country, which would, in turn, guarantee the long-term success of your business.

Our reserves currently amount to $ billion, the third largest in the world, after Japan and the Mainland of China. They are equivalent to more than seven times the currency in circulation, one of the highest levels in the world. Secondly, we pursue a prudent fiscal policy, with small government and no external debt. We have a simple tax structure, a low tax rate, and a public sector expenditure that accounts for only 18% of GDP. Thirdly, our financial system is sound. The banking system is strong and solvent, and well able to cope with the interest rate movements necessary under the currency board system. Capital adequacy ratios among locally incorporated banks average around 18%, and their problem debt ratio is about 3.7%. Our standards of prudential supervision are among the highest in the world. Fourthly, Hong Kong’s economy is flexible and responsive. Because they are governed by free market principles, the markets respond quickly to interest rate changes and other variables, making the economy resilient in absorbing external shocks and capable of adjusting efficiently to validate the linked exchange rate. These are Hong Kong’s economic strengths. Not all economies have them, or would necessarily wish to have them, but they have enabled us to maintain a monetary system appropriate to Hong Kong’s unique needs and capable of withstanding the storms that any open and externally oriented economy must necessarily expose itself to.
But few would doubt in retrospect that the shift away from manufacturing to a higher value-added service-based economy has been beneficial and that it would anyway have been inevitable eventually. There would have been little advantage in trying to slow the process through actions of monetary or exchange rate policy. In other words, the long-term equilibrium path of the real rate is not necessarily flat. The trend path may, at any particular moment, be up, down or flat, while the actual rate constantly diverges from its equilibrium path because of random events such as unforeseen movements in nominal exchange rates or in cost and price levels at home or abroad, or because of the failure of market adjustment processes to work quickly enough. All of this can be quite aptly illustrated by looking at the path of the Hong Kong dollar's real rate since it was first pegged. The natural trend appeared to be upward, though not smoothly so, for the middle period of about ten years, but there is nothing here which tells us what will, or should, be the path from hereon. Against this background, monetary policy may not be expected to achieve much for competitiveness. But policy makers nevertheless have to choose. Should a fixed or floating rate be preferred? Fix or float? In theory, an advantage of floating is that it may allow for the nominal exchange rate to adjust continuously and precisely so as to keep the real rate at equilibrium - an ideal situation if achievable.

I have spent just over four and a half years as a member of the MPC and it has been a most eventful period to be involved with economic policy-making. My period on the Committee has been dominated by the global financial crisis and the major global recession it triggered in late 2008 and early 2009. However, the global recession is now behind us, even if we are still feeling some if its after-effects. Since the second half of 2009, the world economy has been in a recovery phase and the UK and most other European economies have shared in this return to growth. Indeed, the growth of the UK economy has tracked very closely the average performance of the European Union through the recession and into the early phases of the recovery, as Chart 1 shows. And current forecasts point to a continuation of this pattern this year and next. Chart 1 – UK and EU output growth, 1997–2012 Percentage change in real GDP 5 4 3 2 1 0 -1 -2 UK (exc. oil and gas) *  -3  EU-27 *  -4 -5 -6  1997  1999  2001  2003  2005  2007  2009  2011  *:2011 and 2012 are IMF forecasts. Forecasts for the UK do not exclude oil and gas.