samchain/econo-pairs-v1 huggingface dataset:
Kerstin af Jochnick: A springboard for the monetary policy meeting in September Speech by Ms Kerstin af Jochnick, First Deputy Governor of the Sveriges Riksbank, at a meeting at Danske Bank, Stockholm, 21 August 2012. *  *  *  It has become something of a tradition for us members of the Executive Board of the Riksbank to hold a speech at the end of August about the current economic situation and developments during the summer. I think that this is a tradition worth upholding. True, not many people here today manage to completely cut themselves off from world events during their holidays. We still manage to maintain a watchful eye on the inflow of news and statistics. However, although I believe that many of us follow the economic news coverage during the summer months, it may be useful to have a round-up of what has happened. It provides an overview and can act as a “springboard” for starting work in the autumn. A natural starting point for me is the assessment of economic developments described by the Riksbank in the Monetary Policy Report published in early July. I therefore intend to run through this assessment briefly and comment on my own thoughts at the meeting in July. I shall then try to summarise developments since then. Of course, this concerns to a large extent the crisis in the euro area, although some interesting statistics have also been received.

The slowdown was unexpected, although our forecast in July pointed to modest growth in the US economy in the coming period. Indicators for the third quarter are rather mixed so far. For example, unemployment increased somewhat in July, but at the same time employment increased at a relatively strong rate. Consumption was weak in the second quarter, and sales of motor vehicles fell in July. However, the situation on the housing market appears to be improving. For instance, some indicators point to a continued rise in housing prices. Unexpectedly strong second quarter in Sweden While developments abroad have been weak, the Swedish economy has continued to be surprisingly strong during the summer. At the end of July, a first preliminary compilation of National Accounts figures for the second quarter was released. This showed that GDP, when seasonally-adjusted, increased by 1.4 per cent compared with the first quarter, corresponding to 5.7 per cent when calculated as an annual rate. This was a much stronger figure than we and other forecasters were expecting. It was primarily a stronger growth in investments in stock, and to some extent exports, that came as a surprise. The labour force survey statistics show that the number of persons employed continued to rise in June, both in relation to the corresponding period last year and compared with May this year, seasonally adjusted. Unemployment adjusted for seasonal effects was 7.5 per cent. The inflation rate in June and July remained low, which was expected.
And there is also now a clear fiscal policy framework to ensure that the public finances are in a sustainable state in the long run. The success of that approach can be seen in the remarkable degree of stability that the UK economy has achieved since the inflation target was adopted in October 1992. Over that period inflation has averaged 2.7%. And it has been more stable than in any period since monthly RPI figures were first collected in 1947. Output has grown at an average annual rate of 2.9%, well above the post-war average. Growth too has been more stable, and there have now been 31 consecutive quarters of expansion, the longest unbroken sequence since official records began. Nevertheless, while monetary stability may be a necessary condition for exchange rate stability, it is clearly not sufficient. The evidence is the sharp rise in sterling against the euro over the past three years. Sterling is now some 40% higher against the euro than in late 1996. This is not the direct result of UK monetary policy - changes in interest rate differentials account for only a small part of the 1  BIS Review 34/2000  appreciation against the euro, and sterling has hardly changed against the dollar over the past five years. Sterling’s strength is largely the result of continuing weakness in the euro. That does, however, create problems - for some of you, and for the MPC as well. To maintain stability the MPC has an inflation target of 2½%.

2  BIS Review 150/2008  blow some steam off the monetary policy, thereby tending to depreciate the exchange rate. This is precisely what the Board of the Central Bank of Chile decided to do in the face of the severe appreciation early this year, by holding the interest rate constant, while in the most likely scenario, had the appreciation not occurred, rates would have increased. There is abundant evidence that pass-through from the exchange rate to inflation is fairly small. Monetary regimes pegging the exchange rate were based on the notion that exchange rate fluctuations were transmitted to inflation on a one-to-one basis. This was the logic, for example, of pegging the exchange rate in Chile in 1979. However, the empirical evidence shows a relatively low pass-through, particularly under floating regimes where the persistence of exchange rate movements is low. Still, despite the low pass-through, the inflationary effects of very acute depreciations such as those recently experienced by most emerging economies, would not be negligible. The final impact of the exchange rate depreciation on inflation will also depend on the behavior of international prices, which have been losing strength in the face of low growth prospects around the world. With respect to monetary aggregates, some efforts have been made to bring them back to monetary policy, but as I said before, not with the intention of setting money targets, but rather because they are useful indicators of future inflationary pressures.
Workers in the informal sector and low-income segment, as well as those in the most affected industries such as airlines,1 have experienced a sudden loss of employment and income. As many as 150 million people are expected to be pushed back into extreme poverty by end 2021.2 Inherent in the Shariah are the principles of ihsan and adil, hence, solutions should be tailored to commensurate with the current situation and challenges faced by customers, for example, the expansion of targeted repayment assistance to the broader society and businesses from the prolonged Movement Control Order, or incorporation of the financial standing of customers in pricing recalibration for the restructuring and rescheduling of facilities, as well as schemes such as iTEKAD and Skim CAKNA. To further encourage innovation, the impetus for leaders and members of the institution can be put in place such as performance monitoring mechanisms and compensation frameworks that are tied to the Sustainable Development Goals (SDGs) or VBI initiatives. Thirdly, a collaborative mindset is a must for leaders to deliver holistic outcomes. To collectively advance the nation’s transition towards sustainable development, concerted efforts by many, across sectors are necessary to provide an enabling environment and address gaps that would otherwise hold back progress. Among these include data gaps, and market awareness or incentives to encourage change within consumers. Within the financial sector, coordination of data among FIs could contribute to customisation of value-driven solutions for consumers, particularly the underserved. There is an abundance of data within the financial industry but a dearth in coordination.

In fact, this is the first crisis episode when the initial reaction of the National Bank was loosening and not tightening the MP. This time, despite the strategy of de facto fixed exchange rate, solid fundamentals and strong official reserve buffers allowed for loosening of the monetary policy and adopting regulatory flexibility. Also, our initiative for access to the ECB backstop facility, which was also supported by other central banks in the region, and the positive ECB response, allowed for wider space for accommodative policies. The symbiosis of these actions has enabled conducive financial conditions, i.e. decline of borrowing interest rates at historically low levels and uninterrupted credit flows growing at a rate of 6% annually, double than in the EU, that helped "ring –fencing" of the labor market, preserving wages and jobs. Where do we stand now, what are the major challenges ahead and is it time for complacency? A common denominator for all policy makers at the moment is the lingering uncertainty. Many scenarios are in place, from smooth and orderly recovery, through strong rebound with price pressures, ending to stalled recovery amidst new and more virulent strains. From a central bank perspective, our advantage is that there is still policy room for maneuver, although narrowed.
Several euro area economies had experienced a sharp rise in  6  See Gomes, S., P. Jacquinot, and M. Pisani (2011), “Structural reforms and macroeconomic performance in the euro area countries: a model-based assessment”, ECB working paper no. 1323; Berger, H. and S. Danninger (2007), “The Employment Effects of Labor and Product Market Deregulation and Their Implications for Structural Reform”, IMF Staff Papers Vol. 54, No. 3; and Nicoletti, G. and S. Scarpetta (2005), “Product Market Reforms and Employment in OECD Countries”, OECD working paper no. 472. 7  See Eggertsson, G., A. Ferrero, and A. Raffo (2013), “Can Structural Reforms Help Europe?”, Journal of Monetary Economics, forthcoming. 8  See Gerali, A., A. Notapietro, and M. Pisani (2014), “Structural reforms at the zero lower bound”, mimeo. 9  See Andrés J., O. Arce, and C. Thomas (2014), “Structural reforms in a debt overhang, Banco de Espana, working paper n. 1421. 10  For a discussion see Blanchard, O., K. Froot, and J. Sachs (1994), The Transition in Eastern Europe, University of Chicago Press. 11  See Blanchard, O., and F. Giavazzi (2003), “Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets”, Quarterly Journal of Economics, Vol. 118. BIS central bankers’ speeches  3  unit labour costs (ULC) associated with the pre-crisis credit boom, which required a period of internal devaluation to correct. And they were starting out with rigid economic structures.

3  The seminal paper on this issue began is Blanchard, O., and L. Summers (1986), “Hysteresis and the European unemployment problem”, NBER Macroeconomics Annual 1986, Volume 1. 4  For more details see speech by Draghi, M. (2014), “Unemployment in the euro area”, annual central bank symposium in Jackson Hole, 22 August 2014. 5  For details on pre-crisis productivity developments see European Commission (2013), “Catching-up processes in the euro area”, in Quarterly Report on the Euro Area, Vol. 12, Issue 1, March 2013. 2  BIS central bankers’ speeches  What type of supply? This relationship between supply and demand, however, rests on the assumption that structural reforms will have mainly positive short-term effects. But this needs some more qualification. Though the long-term benefits of structural reforms are by and large undisputed6, there are different views about the short-term effects in the academic literature. Reforms can be shown to produce two, opposing sets of forces in the short-term. One is contractionary, as reforms lead to lower prices and higher real interest rates. If monetary policy is at the zero lower bound and unable to respond and fiscal space has been exhausted, higher real rates cause the private sector to postpone consumption and investment decisions and GDP to contract.7 The other set of forces is expansionary. As reforms raise expectations of permanent income, firms bring forward investment and households bring forward consumption. Moreover, for households the prospect of higher potential growth increases the likelihood of future employment, thus reducing precautionary savings and boosting consumption today.
This means practicing what you preach, as General Colin Powell advised: “You can issue all the memos you want and give all the motivational speeches…but if the rest of the people in your organisation don’t see you putting forth your best effort every single day, they won’t either.”  6  Catalysing action means listening to and empowering colleagues, who are more likely to follow a new direction if they have been consulted during its development. And it then means getting out of the way. As Teddy Roosevelt said, “The best executive is the one who has sense enough to pick good people to do what [the leader] wants done, and self-restraint enough to keep from meddling with them while they do it.”  7  Such delegation has traditionally been an anathema for central banks. But when following the crisis the Bank of England doubled in size and tripled in responsibilities, we knew our rigid hierarchy had to change. To start that process, we surveyed widely and met with colleagues across the Bank in order to develop our new strategy. We then slashed the number of internal committees by two thirds and instituted a policy that the author of every analysis had to be in the room whenever it was discussed. We’re now devolving decisions to the right level, changing the way we meet and making the Bank more permeable to the outside world by multiplying our channels of communications and the number of our spokespeople.

But data through mid-September generally indicate that the rise in rates has cut into the upward momentum of the housing sector. Currently, improving economic fundamentals versus fiscal drag and somewhat tighter financial conditions are pulling the economy in opposite directions, roughly cancelling each other. The economy continues to grow and payrolls are rising, but there is little evidence of a pickup in the economy’s forward momentum. For example, real GDP growth is still stuck close to the 2.2 percent average annualized growth rate that has prevailed since the beginning of the expansion. But, as the degree of fiscal drag and other headwinds lessen, the tug-of-war should begin to shift in favor of higher growth. Absent additional fiscal restraint, a further tightening of financial conditions, or some adverse external shock, I expect the economy to grow a bit faster in 2014. So, how compelling is this narrative? In big picture terms, it certainly seems quite reasonable to me. However, no forecast is inevitable and there are some reasons to remain wary. In particular, although the fiscal drag will likely lessen in 2014, I expect it will still be significant, and the outcome of the current federal budget and debt ceiling debates may affect this assessment. Moreover, when one drills down and looks at the recent performance and outlook for the economy’s major sectors, additional caution seems warranted. Turning first to the outlook for fiscal policy, there are two points worth making. First, the CBO projects that significant fiscal drag will persist into 2014.
Chart 2  The interest rate differential is still wide, however, as can be seen in Chart 2, particularly the long-term differential, which has only narrowed by 1 percentage 5  point (and much less, if adjustments are made for CDS spreads). It would therefore have been imprudent to lower the SRR to zero now, and furthermore, there is limited experience of the impact of adjustments in capital flow management tools of this type. However, this does not change the fact that the objective is to keep the SRR at zero whenever possible. We have said that this tool should be our third line of defence, after conventional economic policy (including intervention in the foreign exchange market) and conventional macroprudential tools. This is not to say that the SRR is some sort of emergency device, as distressed economies hardly need worry about excessive voluntary capital inflows. The capital flow management tool, or CFM, is not a capital control in the sense that it restricts or halts certain capital flows explicitly, as was the case during the tenure of the comphrehensive capital controls on outflows. It changes the incentives for inflows — the shorter the investment horizon, the stronger the impact. But this brings some costs with it, in terms of Iceland’s image and the effectiveness of its markets, and it would be better to do without the SRR if possible. This prioritisation of policy tools is consistent with the position taken by the International Monetary Fund (IMF).

(2017) ‘The Bank of England’s FinTech Accelerator: what have we done and what have we learned?’, Remarks given at a meeting for FinTech contacts of the Bank of England’s Agency for the South East and East Anglia at the offices of Mills & Reeve, Cambridge, available at: https://www.bankofengland.co.uk/speech/2017/the-boes-fintech-accelerator-what-have-we-done-and-whathave-we-learned HM Treasury (2009), ‘Pre-Budget Report: Securing the Recovery: Growth and Opportunity’, Cm 7747, December 2009, available at:  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/238510/7747.pdf  OECD (2017), Economic Surveys: United Kingdom, October 2017, available at: http://www.oecd.org/eco/surveys/United-Kingdom-2017-OECD-economic-survey-overview.pdf Ramsden, D. (2017) ‘Monetary policy from end to end: define, decide, deliver’, Speech given at King’s College London, available at: https://www.bankofengland.co.uk/speech/2017/dave-ramsden-speech-atkings-college-london Tenreyro, S. (2018) ‘The fall in productivity growth: causes and implications’, Speech given at Queen Mary University of London, available at: https://www.bankofengland.co.uk/speech/2018/silvana-tenreyro-2018peston-lecture  8  All speeches are available online at www.bankofengland.co.uk/speeches  8
If that had meant a deeper recession, deflation and an even longer-lasting malaise in the economy, then very few UK-based medium-term investors would have been better off as demand and activity would have dropped off further, credit risk crystallised and a range of credit investments went bad. Those with longer term investment horizons – such as everyone in this room should have – will appreciate that the best outcome for UK monetary policy is for it to be set at the right level to lay the foundations for a stable economy. In that regard, we should bear in mind that the economy will always be subject to unforeseen shocks which tend to push it away from stability for a period of time. The job of the MPC is to  3  With such a large change in the nominal exchange rate, one only needs to be slightly out in estimating the marginal impact to generate large errors in the total impact. 2  BIS central bankers’ speeches  react to those shocks by bringing inflation back to target and, subject to that primary objective, in a manner which helps sustain output and employment. As well as inflation back around target, we have also seen a resurgence in growth over the past year. It was difficult to explain the suddenness of the change in sentiment which accompanied the recovery during 2013 but growth in itself should not be regarded as surprising. It is the near stagnation from 2010–12 which was harder to understand.

One of these messages was our expectation that the cards industry in Europe will issue “chip-only” cards from 2012. But if the industry decides to retain the magnetic stripe on cards for practical reasons, we would ask that any data enabling the processing of magnetic stripe transactions should be removed. This should ensure that sensitive account information can no longer be copied. The current levels of fraud clearly show that something needs to be done urgently in this respect. The increasing level of card-not-present fraud carried out over the internet can be addressed by the introduction of secure payment protocols (e.g. 3D Secure or virtual cards). To encourage the use of such security measures, a liability shift – which has been used, for example, as an incentive for EMV migration – could be applied. BIS Review 159/2010  3  Clearly, SEPA requires a harmonised minimum level of security for retail payments to ensure transparency and a level playing field. In order to achieve this, we need to have more clarity about the security requirements as well as about the actors involved in setting these requirements. We have recently launched the idea to set up a Forum for Security Issues and have received a positive feedback from banks. Such a forum would monitor market developments. In addition it could enable the relevant authorities, including banking supervisors and central banks, to align their expectations on security. The Eurosystem is currently investigating what could be the precise mandate and composition of such a forum.
To break this link, we need to have a genuine institutionalised banking union that ensures not only the same supervision throughout the euro area, but also identical rules, an integrated bank crisis resolution mechanism and a common deposit guarantee scheme. We are moving towards the banking union that was missing from monetary union. Given these elements, it is clear that the ultimate responsibility for exiting the crisis lies with governments, at national level – implementing reforms, consolidating public finances and restoring competitiveness – and at the collective level – agreeing on and implementing a more coherent and comprehensive institutional framework around monetary union. These reforms are obviously – and fortunately – the fruit of a democratic process and can only be that. But the corollary to this is that these necessary reforms cannot be immediate: they take time, first to be implemented and then to yield their effects. And the time of the markets is not that of democracy, as you know. Doubts and delays create nervousness, volatility and worry in financial markets, which often lead to sharp rises in interest rates for countries deemed to be vulnerable. 2  BIS central bankers’ speeches  Since the onset of the crisis and these episodes of extreme and, in part, unjustified tensions, the Eurosystem has acted with firmness, creativity and determination in order to restore confidence and stability. The monetary policy conducted by the Eurosystem is contributing to restoring confidence, a key element for the success of the adjustment process.

Caleb M Fundanga: The Bank of Zambia – placing a high premium on education Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony of the Memorandum of Understanding between the Bank of Zambia and the University of Zambia, Lusaka, 23 November 2007. * * * The Vice Chancellor The Deputy Vice Chancellor The Registrar The Deans of various schools Heads of Departments present Faculty Members Invited Guests Ladies and Gentlemen I feel greatly honoured to once again participate in the signing of the Memorandum of Understanding (MoU) between the Bank of Zambia (BOZ) and the University of Zambia (UNZA). The Bank of Zambia and UNZA have a long standing relationship which is intertwined in more ways than one. I am sure that the majority of employees in the Bank that possess a first degree have this University to thank for that achievement. It therefore gives me pleasure to stand here and undertake this function of signing the MOU between our two institutions. Vice Chancellor, the Bank places a very high premium on education. It is for this very reason that it has this day decided to renew its financial support to the University of Zambia’s Department of Economics. Under the new agreement, the Bank has increased the level of support to UNZA to include setting aside a special fund specifically for research purposes and procurement of personal computers (PCs) and software for the same purpose.