samchain/econo-pairs-v1 huggingface dataset:
Fritz Zurbrügg: Competitiveness of Swiss companies – the Swiss National Bank’s contribution Speech by Mr Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank, at the Swiss CFO Day, Zug, 13 January 2016. *  *  *  The charts can be found at the Swiss National Bank’s website. The speaker would like to thank Till Ebner, Rita Fleer and Adriel Jost for their valuable support in the preparation of this speech. He also thanks Carlos Lenz for his helpful comments. Ladies and Gentlemen It is a great pleasure to be here at the Swiss CFO Day 2016. This year’s topic – international competitiveness – represents a key challenge for companies and politicians alike. In order for companies to create growth and wealth in a globalised market, they are continually having to maintain their position against international competitors. Local factors such as the educational standard of the population, labour market flexibility and the tax burden clearly play their part. The importance of monetary policy may be rather less obvious at first glance. However, as was demonstrated on 15 January last year, when the Swiss National Bank discontinued its minimum exchange rate of CHF 1.20 to the euro, monetary policy measures can influence competitiveness. The discontinuation triggered a sharp appreciation of the Swiss franc.

However, my remarks today will focus on monetary policy. 2  BIS central bankers’ speeches  from markets in which they are no longer competitive, or relocate part of their production – and thus some jobs – to lower-cost countries, in order to keep pace with their foreign competitors. Individual companies may even have to cease their activities in Switzerland altogether. A study by the KOF research institute shows that, following a Swiss franc appreciation, the segment of lower-skilled workers in particular sees employment numbers fall. 3 However, the same study also points out that, despite pressure on margins, the remaining companies will respond to the franc’s appreciation by stepping up research and development, improving product quality and increasing the number of highly skilled workers they employ. Over time, these measures should lead the industries concerned to become more productive overall. The majority of empirical studies for other countries confirm that, as a general rule, strong competitive pressure increases an industry’s productivity. 4 Moreover, a number of country studies indicate that an appreciation can have a positive impact on productivity. 5 Often, the relationship is reciprocal, with productivity gains themselves leading to a stronger currency. Thus, in contrast to the short term, in the long term one cannot claim a contradiction between an economy’s competitiveness and a strong currency (cf. chart 9). The fact that Switzerland is among the world leaders in competitiveness, despite the strong Swiss franc, confirms this finding.
I shall follow your work and the results closely, and I hope you enjoy this excellent event. Thank you for your attention. 4  BIS central bankers’ speeches

These two regulations must naturally be enhanced by proposals on the deposit guarantee fund and the crisis resolution mechanism, which are the two other essential pillars of the banking union. The ECB, and all the other national authorities concerned, must now continue the preparatory work so that the Single Supervisory Mechanism can become operational as soon as possible. The Banque de France and the ACP provide an important contribution and intend to play an active role in the new mechanism. This is particularly the case given that around a dozen major French banking groups will be subject, according to the criteria set out in the regulation, to direct supervision by the ECB, even though the ACP will remain responsible for day-to-day supervision. 2. Resolutely pursuing efforts to strengthen the resilience of the financial system by preparing for and implementing new regulations  The international financial regulatory framework evolved substantially in 2012, and will continue to do so in 2013. It is therefore particularly important to adapt to these changes. 2.1  The insurance sector must continue, in France and Europe, to prepare itself for the application of the new prudential regime, Solvency II  Admittedly, 2012 was marked by tough discussions about the Omnibus II Directive and in particular the question of the treatment of insurance products with long-term guarantees. These discussions were unfruitful and will delay the entry into force of Solvency II.
In order to give the bank an incentive to quickly phase-out this support in the event that the State did acquire shares, the agreement stipulated that the preference shares would be converted to common stock with extra voting rights if they were not redeemed within three years. The internationalisation of the financial system – a challenge Cross-border banks generate a particularly negative external effect. If a cross-border bank experiences problems in one country, the costs incurred are distributed between the countries in which the bank operates. From the authorities’ point of view, the problem is that it is difficult today to prevent a systemic risk that arises and develops in another country. The principle that is applied in the EU today, the so-called home country principle, states that it is the authority in the country where the company concerned has its registered office that is responsible for supervision. This means that if a bank has a branch in another country the authority in the bank’s home country is responsible for supervision, but if a bank has a subsidiary bank in another country then the authority in the country concerned is responsible. The crisis has demonstrated that the home country principle in its current form is inadequate for preventing cross-border risks. An example inspired by the situation in the Baltic countries may clarify the problem that cross-border banks pose to national authorities. Assume that we have a Swedish bank that borrows in foreign currency on the international market.

Responses by European authorities As noted, banks with international operations have to develop local products, also to comply with different legal systems, which implies significant costs. Important steps are being taken by EU authorities to overcome the obstacles of segmentation. However, legal aspects are only one element hindering the integration of the retail markets, since proximity to the customer is still an important factor. Even though it is likely that the retail markets will maintain local features at least for some time to come, any unnecessary burden on the cross-border expansion of activities should be lifted to the maximum extent possible. At the regulatory level, the European Commission is generally striving to finalise the Single Market programme via the so-called Financial Services Action Plan. The higher cost of cross-border retail payments, as compared with domestic ones, has been a very topical issue, and it has been taken as a sign of a lack of integration. In July 2001, the European Commission proposed a draft Regulation to close the gap between domestic and cross-border payments. In the draft now being examined by the Council and the Parliament, banks would be obliged to equalise prices for cross-border and domestic payments. The ECB has stated that the Eurosystem shares the general objective of the Regulation. However, the Eurosystem has expressed reservations about the chosen method, because it gives too little time to the banking industry to adjust in a rational way.
Some has in fact already been withdrawn with the return of the standard rate of VAT to 17.5% at the beginning of the month. But uncertainty about how and when fiscal policy will respond has a direct bearing on monetary policy. And markets can be unforgiving. As Federal Reserve Chairman Bernanke said recently about the similar fiscal position in the United States, “near-term challenges must not be allowed to hinder timely consideration of the steps needed to address fiscal imbalances. Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy  4  BIS Review 4/2010  economic growth”. The Chancellor has made clear that the Spring Budget provides the opportunity to do precisely that. Over the past year, the UK economy has battled against the headwinds of an intense monetary squeeze and a sharp fall in world trade, supported by the tailwinds of a huge policy stimulus and a lower exchange rate. At this very early stage of the recovery, it is particularly difficult to judge the medium-term prospects for the economy. Ten years ago, I described how movements in macroeconomic data can sometimes bear a “resemblance to oldfashioned disco dancing – sharp movements in unpredictable directions creating much excitement, accompanied by a good deal of noise”.

In somewhat simplified terms there are two different ways to describe monetary policy based on inflation targeting: The first is to employ a simple monetary policy rule whereby the policy rate is set as a function of the current inflation rate and the output gap, which is a measure of the difference between actual and potential output and reflects resource utilisation in the economy.1 When the output gap is negative, actual output is lower than potential output, which means that there are plenty of spare resources in the economy. In such a scenario price and wage increases are small and inflation is generally below target. When the output gap is positive the situation is the reverse: resources are overstretched and the excessive demand generates inflationary pressures in the economy. So according to the rule the policy rate should be raised if growth is above its potential rate and inflation is higher than the inflation target, and vice versa in the reverse situation. When actual and potential output are the same the economy is in balance and inflation is normally in line with the target, provided that policy is credible. A common argument in favour of conducting monetary policy in this way is that the central bank’s knowledge of how the economy functions is too limited for a forecast-based monetary policy to be formulated in a good enough way. Incorrect forecasts can also burden the central bank with credibility problems, which is one reason to prefer a simple rule.
As a result, all of you were forced to re-organize your work practices, automate certain functions and put extra effort to ensure that the output of the Bank would not suffer as a consequence of the lower staff strengths. Although this would have caused problems at the initial stage, I believe that you managed to cope admirably in the face of this challenge. As you are aware, the Central Bank’s focus and functions have evolved over the years in response to changes in the economic environment. In keeping with trends in Central Banking around the world, the objectives of the Central Bank of Sri Lanka were streamlined by amending the Monetary Law Act (MLA) in 2002 which defined the Bank’s core objectives and freed it from the multiple objectives originally assigned to it. Accordingly, the Central Bank now pursues the core objectives of economic and price stability (through appropriate monetary policy) and financial system stability (mainly through its role as a supervisor and regulator of the financial sector). The Central Bank accordingly will, over time, devolve some of its other functions including agency functions to other institutions. However, it still has a major role to play in the interim to build up capabilities of the institutions earmarked to take over the functions performed by the Bank at present. Also, it is expected that there would be a further outsourcing of administrative and ancillary functions of the Central Bank.

But the reform process in East Asia has proven to be worth the efforts, as you can see from the fast growing intra-regional trade. Many of these reforms remain to be completed, and we need to continue to press on with the reform agenda. But the changes from now on should not be as difficult, as public sentiment is supportive of the benefits of these reforms, in terms of the increased efficiency, predictability, and transparency to businessmen and entrepreneurs, both domestic and foreign. One just needs to cross that threshold. Thank you for your attention. BIS Review 7/2006  3
The adverse impact on profitability, and therefore capital, would likely limit the pass-through of rate cuts into loan rates, reducing the effectiveness of negative interest rates. That is why the MPC has concluded that the lower bound on Bank Rate is “close to, but a little above, zero.” This judgement is informed by close consultation with PRA supervisors. Of course, the effectiveness of unconventional policies means that there is considerable total policy space. In the UK, the MPC can increase its purchases of both gilts and corporate bonds, providing stimulus through a number of channels including portfolio rebalancing. At present, there is sufficient headroom to at least double the August 2016 package of £ billion asset purchases, a number that will increase with further gilt issuance. That would deliver the equivalent of around a 100 basis point cut to Bank Rate on top of the near 75 basis points of conventional policy space. Forward guidance at the ELB adds to this armoury. All told, a reasonable judgement is that the combined conventional and unconventional policy space is in the neighbourhood of the 250 basis points cut to Bank Rate seen in pre-crisis easing cycles. For example, as banks’ profitability is gradually eroded, they may widen net interest margins by cutting deposit rates further or raising loan rates. For more detail on the potential for time dependency, see Brunnermeir, MK and Koby, Y (2018) ‘The Reversal Interest Rate’, NBER Working Paper No. 25406.

On the basis of this past behaviour, the MPC would have raised interest rates by 2 to 3 percentage points between August 2013 and the end of 2014 (Chart 5). For anyone who might suggest the MPC should have followed its historic reaction function (and several external commentators did at the time 7), note that, even on unchanged policy, CPI inflation in the summer of 2016 was running at only about ½% and core CPI inflation around 1¼%. Chart 5: Forward market interest rates rose only modestly as unemployment fell quickly towards 7% August 2013 guidance issued  Data published showing Percent unemployment fell to 6.9% 4.0 February 2014 3.5 guidance issued 3.0  Counterfactual path for Bank Rate based on historic correlation with survey indicators of output growth  2.5 2.0 1.5  UK 1 year instantenous forward  1.0 0.5 0.0  Jan. 12  Jul. 12  Jan. 13  Jul. 13  Jan. 14  Jul. 14  Sources: Bloomberg Finance L.P., IHS Markit, ONS and Bank calculations. In an environment of strengthening domestic activity and some external exhortations to raise interest rates, forward guidance was effective in managing expectations. Surveys conducted in the months that followed its introduction indicated high awareness among companies, with almost half reporting that they expected Bank Rate to remain at low levels for longer than they would have done had guidance not been in place. And the majority of businesses said that the Bank’s policy guidance had made them more confident about UK economic prospects.
3 At the same time, the problems of falling inflation and inflation expectations also became increasingly apparent in the euro area. This led to the European Central Bank signalling the need for even more expansionary monetary policy in the period ahead, with low interest rates for even longer, supplemented by extensive asset purchases. The increasingly expansionary monetary policy in the euro area also led to monetary policy reactions from several smaller countries on the outside. 3 The significance of the inflation target for the economy is explained in detail in Sveriges Riksbank (2015a) and  Flodén (2015). 2 [12]  Chart 2. Inflation and inflation expectations have picked up 3  3  2  2  1  1  2.3  2.3  2.2  2.2  2.1  2.1  2.0  2.0  1.9  1.9 Inflation expectations  0  0  CPIF excluding energy  1.8  1.8  1.7  1.7  CPIF  -1  -1 10  11  12  13  14  15  16  1.6  1.6 10  11  12  13  14  15  16  Note. Annual percentage change and per cent. The CPIF is the CPI with a fixed mortgage rate. Inflation expectations 5 years ahead according to money market participants. The broken line indicates the time of the monetary policy decision in February 2015.

The Riksbank’s balance sheet SEK billion 900  900  Assets 800  Liabilities Equity  700  800 700  Other Foreign exchange reserve  600 500  600  Foreign exchange loans  400  400  300  Assets 200  100 Gold  500  Foreign exchange reserve  Liabilities Equity Banknotes and coins  0  August 2008  Government bonds  Certificates and fine tuning  300 200  100  Gold  Banknotes and coins  0  September 2016  Source: The Riksbank  The Riksbank purchases government bonds to support the upturn in inflation ... To begin with, I would like to remind you that the aim of the Riksbank’s operations is not to make a profit and deliver dividends to the government. Our task is to maintain price stability, and bond purchases are one component of the expansionary monetary policy we are conducting in order to safeguard the credibility of the inflation target. The Riksbank started purchasing government bonds in February 2015. At that time, inflation had been low for a long time, long-term inflation expectations had fallen to a record-low level and a period of falling oil prices risked pushing down inflation expectations even further (see Chart 2). In this situation, the Riksbank needed to safeguard continued confidence in its ability and willingness to stabilise inflation around the inflation target. As we know, a credible inflation target lays the foundation for efficient price-setting and wage formation and hence promotes good growth in the economy.
This is attributable to hikes in unprocessed food prices driven by supply-side shocks. 12  BIS Review 68/2010  CPI by Subcategories  Contribution to CPI Inflation in 2009  (Annual Percentage Change)  (Percentage Point)  25  Go ods exc l. Food and Energy 29%  2006 2007  20  2008  Foo d 40%  2009 15  Energy 11%  10  Serv ices 20%  5  0 Food  Energy  Goo ds e xcl. Fo od a nd En ergy  Services  Source: TURKSTAT, CBRT. 35. Source: TURKSTAT, CBRT. Despite having followed a volatile course during periods when temporary tax adjustments were effective, core inflation, which is useful for predicting underlying inflation, had a remarkable downtrend consistent with medium-term targets throughout 2009. Core Inflation Indicators and CPI Inflation (Annual Percentage Change)  12 10 8 6 4 2 0  CPI  SCA-H  SCA -I  Source: TURKSTAT, CBRT. 36. Recent data releases indicate that the pace of recovery in economic activity continues. Domestic demand rises gradually as the lagged effects of monetary policy implementations become evident, whereas, uncertainties regarding external demand persist. Accordingly, we expect that after following a volatile course significantly above the target for some period, inflation will be back on a downtrend by the phasing out of temporary effects as of the last quarter of the year and return to target-consistent levels as of early 2011.

At this point, I would like to emphasize that we closely monitor pricing behavior as inflation hovers around high levels, albeit for a temporary period. I would like to hereby remind you that we will provide public with the updated evaluations and forecasts on medium-term inflation outlook along with possible risks and policy measures, more extensively in the Inflation Report to be published on 29 April. BIS Review 68/2010  13  Distinguished Guests, 37. Throughout 2009, as the Central Bank, we focused on policies oriented towards containing the adverse effects of the crisis on the economic activity and on financial stability while also overseeing price stability. Thanks to the experience gained from domestic crises in the recent past, we were able to make prompt and effective decisions, thus we were able to do our part to minimize the adverse impacts of the global crisis. In this period, the soundness of the financial system in addition to the relatively limited deterioration in the risk premium provided monetary policy with an extra room for maneuver. 38. Accordingly, envisioning that undershooting the inflation target at year-end has been more likely, we continued the rate cut cycle that we initiated in November 2008 by pursuing a front-loaded monetary policy in early 2009.
Ardian Fullani: Recent economic and financial developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on monetary policy decision of the Bank of Albania’s Supervisory Council, Tirana, 25 May 2011. *  *  *  Today, on 25 May 2011, the Bank of Albania’s Supervisory Council reviewed and approved the monthly Monetary Policy Report. Based on a thorough analysis of Albania’s latest economic and monetary developments and discussions on their outlook, the Supervisory Council decided to maintain the key interest rate unchanged, at 5.25%. The Supervisory Council judges that the current monetary conditions are appropriate to meet inflation target and continue the economic activity stimulus. Let me proceed with an overview of economic developments and main issues discussed at today’s meeting. *** The Albanian economy continues to maintain a positive development trend. Recovery in domestic demand over the first four months of the year and the positive contribution of external demand, have impacted on positive growth of the Albanian economy. Also, the major macroeconomic balances have remained stable and the financial system indicators appear to have generally improved. Following the shock of February, CPI inflation has followed a downward trajectory, reflecting the subdued inflationary pressures on the economy and Albanian financial markets. Available data on 2011 Q1 show that the economic activity has registered growth; however, the persistence of some spare capacity suggests that this growth remains below potential.

In any event, based on the experience of Spain and other countries, I consider that in all key aspects of the resolution process, the direct involvement of the supervisor is crucial to avoid information gaps, prevent duplications and ensure efficient use of the resources employed to monitor financial institutions. 5  Conclusions  To conclude, I believe that as resolution authorities we have a very exciting policy agenda in front of us. Indeed, it is hard to think of other policy tasks which are so closely related to such a large number of first-order public objectives such as financial stability, the orderly functioning of the capital markets and the integrity of the public finances. Yet it is clear that, since resolution policy is arguably in its childhood as a recognised policy area, we still lack something like a comprehensive manual to guide our actions in the field. Therefore our decisions must often be taken as if we were exploring an uncharted territory full of legal and economic risks. That is why I think that events like this, which allow competent authorities to exchange experiences and thoughts, are no doubt extremely useful in counteracting our uncertainty until a sufficiently large store of knowledge, if not doctrine, becomes available. I wish to thank Antonio Carrascosa, Mario Delgado and the rest of the FROB team involved in the organisation of this conference, and all of you for your participation. Thank you. BIS central bankers’ speeches  5