samchain/econo-pairs-v1 huggingface dataset:
Jan Frait: Monetary macroeconomics and central banks in turbulent times Lecture by Mr Jan Frait, Deputy Governor of the Czech National Bank, at the MEKON 2023 conference, organised by the Faculty of Economics, VSB-Technical University of Ostrava, Ostrava, 17 March 2023. *** I'd like to thank the conference organisers for inviting me to the place where I began my academic career in late 1990 and which then became my ticket to the board of the central bank ten years later. The knowledge I gained from my discussions here at the Faculty, specifically in the Department of Economics, has always been a foundation stone for me in making monetary policy decisions. At conferences, central bankers these days tend to give presentations in which they show charts to explain what's going on in the economy and what we can expect to see in the near future. But for this conference, for the first time in my professional life as a central banker, I have opted to give a straight lecture. This will hopefully better enable me to convey to you my longerterm view of the relationship between academic monetary macroeconomics and monetary policy-making. I will try to support this intention by not citing any literature – neither my own, nor that of my favourite economists, nor that of economists whose relevance I have doubts about.

This is not the case to the same extent in Malta, where the HICP inflation rate is well above the euro area average. Let me now turn to the role of fiscal policy, which in the context of monetary union is the only national policy tool available for short-term adjustment. In Malta, however, in spite of the remarkable fiscal consolidation achieved in the run up to euro adoption, deficit and debt to GDP ratios are still at a level that allows limited scope for using fiscal measures to support economic activity. I shall elaborate on the implications of this constraint later on. Fiscal prudence is also necessary to safeguard the country’s credit rating and maintain investor confidence. There is indeed growing evidence that investors are increasingly discriminating among euro area countries on the basis of their fiscal outlook. From a budgetary standpoint, moreover, risk premia on long-term interest rates will increase, and the debt servicing burden will therefore grow, if the perception gains ground of a departure from the path of fiscal consolidation. Finally, from a longer-term perspective, a prudent budgetary policy is also required to cater for the growing costs of Malta’s ageing population, as was vividly pointed out in a recent report published by the European Commission, 8 and the still unidentified costs associated with climate change.
Both projections are higher than expected in June, taking into account the actual increases of recent months and prospects for a somewhat faster recovery of the world economy (Table 3). Inflation will converge to 3% by 2022 and in the short term will not fall below 2% annually. Although in the short term this trajectory is somewhat higher than was forecast in June, largely due to the expected increase in consumption, in the medium term its main determinant continues to be the lower cumulative activity. The core measure will remain above 2.5% in the short term, to converge to 3%, also in 2022. Two-year-ahead inflation expectations remain at around 3% (Figure 14). Monetary policy will remain highly expansionary, combining the policy rate at 0.5% minimum and unconventional measures. The latter will be renewed or extended if the recovery of the economy and the convergence of inflation to the target so require. In turn, the Monetary Policy Rate will remain at its minimum level for much of the two-year monetary policy horizon. Thus, over the next two years, the Bank will provide a significant monetary boost to the economy (Figure 15). The macroeconomic scenario continues to show more uncertainty than usual. The projections recognize that social distancing will alter the ways to operate in areas where human interaction is key quite longer. However, it cannot be ruled out that these impacts will exceed estimates, which could be particularly harmful to the recovery of the labor market because of the many people employed in these activities.

In the same vein, allow me, on behalf of the Bank of Zambia and indeed on my own behalf, to wish the Government, and people of the Republic of Zambia a happy 50th birth year which we will be celebrating on 24th October 2014, and one which has been attained under a tranquil environment and economic progress. Fellow Staff and Invited Guests, I would most likely be in breach of all moral standing if I did not, at this stage, emphasize the Bank of Zambia’s deep commitment to the welfare and well-being of our employees. I implore all of us to aim at leaving a legacy of professionalism and excellence in all that we do. I further encourage all the sportsmen and women participating in today’s events not to despair should they not emerge victorious for one reason or another. Rather, I strongly urge you all to walk away after the games feeling immensely proud that you have been an integral part of a truly momentous and historic occasion. Remember, one can only turn 50 years of age once! Ladies and Gentlemen, allow me to further extend my sincere gratitude to the commercial banks that have sent their representatives to come and attend this event. The support we have received to date has been unflinching throughout the years. We shall continue to work together in order to ensure that the levels of service delivery to our customers is raised and maintained at high standards. Distinguished Guests, this really, is not an occasion for long-winded speeches.
So the question is, will this very complex Chinese driven global value chain face difficulties in terms of engendering growth, going forward in the absence of those structural reforms that we seek countries as diverse as Greece and Italy and even Ireland starting to implement as a means to fostering stronger growth going forward. That’s going to be a big challenge for us in the next few years and I think this conference would do well to try and give us a perspective on that examining in detail on how these structural changes in global economies impact small economies like Sri Lanka and perhaps give us a guidepost in terms of how we can integrate our economy further into the global value chain, which to me is essential for ensuring the future economic prosperity and stability of this country is well-bedded. Thank you very much for your time here this morning and I thank all the participants for your contributions and we look forward for a very stimulating couple of days in this hall. BIS central bankers’ speeches  3

The theme of today’s seminar – “Strategies for the Development of Islamic Capital Markets” – is most timely and relevant to Hong Kong as we are about to introduce an enhanced legal framework as a first step to promote the sustainable development of Islamic finance and we are eager to learn the other key components to form a coherent strategy. We very much look forward to the insightful views of the distinguished speakers on the latest developments of the global Islamic capital markets, the prospects and opportunities that lie ahead, and further ideas to bring Islamic capital markets to the mainstream. Growing importance of Islamic finance in the global financial scene 4. Being an international financial centre, it is important for Hong Kong to embrace Islamic finance given its rising prominence in the global financial arena. The size of the global Islamic capital markets has expanded more than 10-fold since its early phase of development in the 1980s, reaching an estimated $ trillion at the end of 2012.1 With this critical mass, Islamic finance has become an integral part of the global financial system not only catering for the needs of Muslims, but also attracting other investors and fund raisers, regardless of race and religion. Reflecting the deepening sophistication of this market, we are seeing an increasing variety of products and services, ranging from Islamic banking products and sukuk, to Islamic equities, Islamic funds and takaful. 5. This remarkable market deepening process has not been retarded by the challenging financial landscape.
This improvement evidences their willingness and ability to respond to market demands and to future regulatory requirements, although additional adaptive efforts to raise higher-quality capital may be required of some banks. 4  BIS Review 51/2010  With regard to liquidity, Spanish banks have always been attentive to this risk, as evidenced by their bond issues and long-term securitisations, despite the fact that the cost of short-term funding was more attractive. This conservative funding term structure on the liabilities side is one of the factors explaining the strength of Spanish banks during the crisis. However, the financial markets are still far from being back to normal, so it is essential that institutions continue paying particular attention to liquidity and funding. In the medium term, and despite that strong starting point, the new regulations will require additional efforts, particularly with respect to the short-term liquidity buffers which banks must have in place. Hence, in addition to the uncertainty resulting from the depth and duration of the financial crisis, banks have to deal with the additional pressure put on them by the new regulations, still to be defined in many cases. Banks have to make a special effort to explain to the market how they will meet the challenges posed by the crisis and to convey their plans for successfully coping with the regulatory changes. This transparency drive will have to be stepped up in the immediate future.

To this end, the Basel Committee has tabled an important set of measures aimed at increasing the financial system’s resilience in the medium and long term. These include most notably: –  Firstly, the proposal to increase the amount and quality of capital required of banks in order to enhance their loss-absorption capacity. The definition of capital will, moreover, be more transparent and internationally comparable. –  Secondly, consideration is being given to introducing minimum global liquidity standards and establishing common criteria to help supervisors identify and evaluate liquidity risk. –  Thirdly, work is under way to define various measures to mitigate the procyclicality of the financial system, which was not taken sufficiently into account in the pre-crisis period. Along these lines, the creation of countercyclical capital buffers has been proposed so as to contribute to reducing and not amplifying credit cycles. The aim pursued would be for banks to reinforce their capital during upturns and to be able to use it subsequently in periods of stress. In other areas, measures have been proposed to lessen the tendency of financial market participants to accentuate business cycles by their behaviour. Specifically, a series of criteria have been set for bankers’ pay in order to lessen their incentives to adopt risky, short-termist strategies. These have already been applied in the main developed economies. In the field of accounting regulations, too, significant efforts are being made to strengthen standards.
The medium income countries today finance their growing industries and their infrastructure with the aid of the savings capital from us in the rich part of the world. At the same time, those who save money - not least all those saving for pensions can benefit from the growth potential that exists outside of their own country’s borders. Free capital movements have also made it possible to diversify savings capital and thus reduce risks. This gives greater financial security both among those who invest and those who use borrowed capital. Globalisation brings many benefits that are not only economic. Contacts with the surrounding world have increased and developments in IT make it increasingly difficult to isolate a country. Openness is increasing in all areas, facilitating the exchange of knowledge and information and receives further nourishment from growing economic prosperity. In addition, since it has become less costly to travel and easier to undergo education in other countries, more and more people have had personal experience of everyday life in other countries. Criticism of globalisation Nevertheless - despite the very positive development in many respects - there are many that regard globalisation as a threat rather than an opportunity. There are a lot of organisations with many different views in this area. However, they seem to share some of the concerns about trends in the world economy. This may concern the following: •  Trade and new technology increase competition and the requirement to change.

As in many places around the region, employers in Rochester are having difficulty finding workers to fill a number of middle-skill jobs, like nurses, automotive technicians and computer-controlled machine operators. Out of this partnership, we launched a pilot project challenging college students to create a short video profiling middle-skill jobs that are available in the area in order to drum up interest in opportunities many people may not even know exist. Access to credit for small businesses is another important issue we’ve focused on in recent years. Our outreach group conducts a bi-annual poll of small businesses in our region to better understand their credit needs and access to credit. The results consistently show that gaining access to credit is one of the top growth challenges for small businesses. In my visits across the District, I have heard small business owners voice similar concerns. In response, we’ve helped bring small businesses together with lenders to help smooth access to credit. Over the past year we have conducted ten access-to-credit events— workshops, clinics and conferences—for companies interested in learning about traditional and alternative sources of financing. We partnered with local and national government agencies, small business development centers and local nonprofit organizations to hold these events throughout the District. One such workshop was held recently in Queens. The Queens Economic Development Corporation and the Queens Chamber of Commerce, with support from the New York Fed’s Asian Professional Network Alliance, co-sponsored a resource clinic for small businesses.
We are entering a consultation period that is absolutely critical and that will lead in June next year to the issuance of an opinion by EIOPA. This opinion, which will be reviewed by the Commission, will form the basis for the negotiations with the Council and Parliament that are scheduled to start in early 2021. Here again, we need to put the challenges posed by Solvency II into perspective. Let me remind you that this is the most ambitious reform ever undertaken in insurance. The new regulatory framework, based on an  Page 5 of 6  approach that takes into account all risks to which insurers are exposed, has undeniably strengthened the resilience of the European insurance market. However, and you yourselves see this every day, the prudential requirements imposed by Solvency II have a number of drawbacks, including being volatile and complex. To remedy this, let’s take advantage of the window of opportunity offered by the directive’s review, and push for four priorities that are essential for financial stability and for the sound financing of the economy: (i)  All things being equal, the revision must not lead to an increase in capital requirements for the European insurance industry. (ii)  It would be counterproductive to artificially lower the capital requirement by stopping equity investments. But despite the advances obtained in 2018, this asset class is still being penalised.

Default rates for consumer finance ABS and SME collateralised loan obligations have also remained low, well below 1%, throughout the worst financial and economic crisis we have experienced. As regards covered bonds, credit quality is ensured by a double recourse (on the underlying assets and on the issuer), which is in fact comparable with the double protection that exists in our standard repo operations. Overall, the decisions announced last week were taken with a view to underpinning the firm anchoring of medium to long-term inflation expectations, in line with our aim of maintaining inflation rates below, but close to, 2%. We expect the two purchase programmes to effectively complement the TLTROs in enhancing the functioning of the monetary policy transmission and in providing further monetary accommodation given that we have now reached the lower bound. The newly decided measures, together with the TLTROs, will have a sizeable impact on our balance sheet, which is expected to move towards the dimensions it used to have at the beginning of 2012, and the Governing Council stands ready to take further action if needed, in compliance with its mandate to maintain price stability. Conclusion Ladies and gentlemen, it is time for me to conclude. My bottom line is also my starting line. Investment is rightly said to be today’s demand and tomorrow’s supply. Yet investment in Europe is falling short. If we don’t manage to get investment going again, we will weaken the economy in the short run and undermine its prospects in the long run.
•  Final details of the regulatory capital framework will be announced by June this year. Diverse ecosystem The second pillar: Singapore has a diverse financial ecosystem. The various parts of the financial sector not only serve important functions in their own right, but are mutually reinforcing. •  The World Economic Forum has ranked Singapore 2nd worldwide for financial market development – a testament to the depth and breadth of Singapore’s financial sector. A full-fledged financial centre Singapore provides a broad and integrated suite of financial services. We are an important regional funding centre. •  The Asian Dollar Market, with its total asset size of more than 1 trillion US dollars, has played a key role in serving the financing and treasury needs of individuals, corporates, and institutions in Singapore and the region. We are the premier asset management centre in Asia, acting as gateway to the world for Asian investors and for the world to tap Asian investments. •  Assets under management by Singapore-based managers have more than quadrupled over the last decade to reach 1 trillion US dollars in 2011. We are the leading insurance centre in Asia. •  Singapore plays host to about 190 insurance institutions meeting the protection needs of the economy and society across the region. •  The industry has built up expertise in complex and specialist risks – including marine, energy, aviation and credit and political risks. We have one of the most developed bond markets in Asia.

•  Singapore’s total market capitalisation has grown by over 150% in the last decade, to 270 billion US dollars in 2011. We are the fourth largest foreign exchange trading centre in the world. •  FX and FX derivatives turnover in Singapore has more than tripled in the last decade, with an average daily traded volume of about 360 billion US dollars. We are Asia’s leading commodity derivatives trading hub. •  Most of the major global banks have their regional hubs in Singapore. •  According to some estimates, Singapore accounts for more than half of Asia’s OTC commodity derivatives trades. To succeed in the new financial landscape, Singapore must comprehensively support Asia’s long-term financing needs. Let me highlight two strategic areas where we will harness our diverse financial ecosystem: debt capital market and infrastructure financing. Debt capital market In a world of deleveraging and higher regulatory constraints on banks, it is now more urgent than ever to develop strong capital markets to complement bank lending and help to provide a better match for longer term funding requirements. 4  BIS central bankers’ speeches  The fundamentals for a strong debt capital market are in place. •  The Singapore bond market is fully accessible to all issuers and investors globally with no capital controls, hedging restrictions, or withholding taxes. •  There is diversity of issuers – financial institutions, corporations and government agencies. •  There is variety in instruments issued, including structured and securitised debt.
the banking crises in the Nordic countries around 1990. Today, I will discuss whether and how monetary policy should take the build-up of financial imbalances into account. I will also touch upon the driving forces in the foreign exchange market. The krone is affected by mechanisms similar to those found in other asset markets. Finally, I will say a few words about current economic developments. Internationally, developments are weaker than expected. Interest rate cuts are expected in a number of countries. The fall in international interest rate levels has dampened the effects of our interest rate reductions on inflation. Growth in Norway is likely to be fairly weak now, and with an unchanged interest rate, inflation is likely to remain below target in the period ahead. The easing of monetary policy will therefore continue. Norges Bank's Executive Board will also carefully consider reducing the interest rate in larger steps. Price stability and financial stability Seeking to foster price stability and financial stability is often considered a natural task of central banks. In Norway, the Government has set an operational objective for monetary policy. This objective 1 is low and stable inflation. Financial instability is often defined as the absence of financial stability. Financial instability is characterised by unduly wide fluctuations in prices for assets such as dwellings, commercial property and securities, or failure in the functioning of financial institutions or financial markets. Financial instability is characterised by disturbances in credit availability or the flow of capital.

Gross non-performing loans to the business sector increased considerably through 2002. During the banking crisis, loans to commercial property companies accounted for a substantial share of banks’ loan losses. Losses on such loans are relatively small today. Lower rental and property prices and higher vacancy rates may suggest that losses in this sector will increase in the period ahead. Most banks, including the largest, have satisfactory financial strength and are fairly well equipped to cope with substantial losses. We therefore consider the outlook for financial stability to be satisfactory, even though loan losses are moving up. Debt growth and the level of household debt are high. However, we expect debt growth to slow in time, partly due to weaker economic developments and as an after-effect of the levelling-off of house prices. Consequently, developments in debt and house prices are no longer an obstacle to an easing of monetary policy. The exchange rate as an asset price An asset price of particular importance to economic developments is the exchange rate. It differs from other asset prices in a number of ways and it is to a lesser extent linked to financial stability. In the long term, changes in the exchange rate will essentially be based on underlying fundamentals. If inflation in Norway is persistently higher than that of our trading partners, the nominal krone exchange rate will tend to depreciate. In the very long term, the nominal exchange rate will therefore be determined by inflation differentials.