samchain/econo-pairs-v1 huggingface dataset:
Muhammad bin Ibrahim: The dollar, the renminbi, and the evolution of the international monetary system Welcoming remarks by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the SEACEN-OMFIF Policy Dialogue “The dollar, the renminbi, and the evolution of the international monetary system”, Kuala Lumpur, 31 May 2017. * * * Welcome to the SEACEN-OMFIF Policy Dialogue. I am privileged to be here as we assemble to exchange views, insights and perspectives on an interesting and contemporary issue. Indeed, the theme on “The Dollar, the Renminbi and the Evolution of the International Monetary System” not only has regional importance but also global implications. The rules, institutions and conventions of the international monetary system are far-reaching. They shape the actions and behavioral responses of players in the global economy. It is for this very reason that I look forward to the diversity of views that will enrich our discussion on this topic today. I shall provide some perspectives on the existing landscape of the international monetary system, the shift that is taking place and the possible implications for Asia. Although there are various elements of the international monetary system, I will focus on the interaction of currencies, particularly as the title indicates, on the dollar and the renminbi. Dollar Dominance The US Dollar (dollar) is unequivocally the dominant currency in the international monetary system. Its influence is, no doubt, prevalent.

Since then, differentials have narrowed again somewhat due to a more pronounced decline in the US. The yield on ten-year Confederation bonds last stood at –0.15%, virtually unchanged versus midyear. Let me now turn to the foreign exchange markets. Compared to the turbulent developments on the equity markets, the currencies of the major advanced economies traded within fairly narrow ranges in the second half of the year. On a trade-weighted basis, the US dollar has gained 2.5% since mid-year thanks to a buoyant economy and rising interest rates. The tradeweighted euro, however, lost almost 1% over the same period due to weaker economic momentum in the euro area recently and uncertainty linked to Italy’s budget issues. The Swiss franc remains vulnerable to changes in risk sentiment on the international financial markets. It strengthened moderately, by 2.5%, in the second half of the year (cf. chart 4). This appreciation is primarily due to the period between August and mid-September, when concerns about emerging markets – and possible consequences for Europe’s finance sector – caused a renewed spike in risk premia on European financial securities. From mid-September, the Swiss franc depreciated again slightly, particularly against the US dollar which has become more attractive to investors due to the greater interest rate advantage. Furthermore, emerging market currencies stabilised noticeably. Overall, developments on the foreign exchange markets show that the situation remains fragile and that the Swiss franc continues to serve as a safe haven in times of heightened uncertainty.
The HSBC Bank with its global connections could now facilitate financial transactions in the North with all parts of the world, while HSBC’s presence in the Jaffna Peninsula from today onwards, would convey an important signal to the world that tangible progress is being made in post conflict Sri Lanka. I wish Mr Nick A Nicolaou, his team in Sri Lanka the HSBC and all their customers, especially the ones in this area, all success. Thank you. BIS Review 16/2010  3  Lars E O Svensson: Inflation targeting after the financial crisis Speech by Prof Lars E O Svensson, Deputy Governor of the Sveriges Riksbank, at the International Research Conference “Challenges to Central Banking in the Context of Financial Crisis”, Mumbai, 12 February 2010. *  *  *  I thank Charles Bean, Claes Berg, Alan Blinder, Stephen Cecchetti, Chuck Freedman, Charles Goodhart, Lars Nyberg, Irma Rosenberg, Hyun Shin, Frank Smets and Staffan Viotti for discussions of these issues. The views expressed here are my own and not necessarily those of other members of the Riksbank’s executive board or of the Riksbank’s staff. Hanna Armelius and Hans Dellmo of the Riksbank’s staff contributed to this speech. As the world economy begins to recover from the financial crisis and the resulting deep recession of the global economy, there is a lively debate about what caused the crisis and how the risks of future crises can be reduced.

6  BIS Review 69/2010  Inflation targeting has served the Norwegian economy well in the run-up to the crisis and later. Inflation expectations are firmly anchored. This is partly because inflation has on average over time been close to, but somewhat lower than, the target of 2.5 per cent, and because annual variations have not been pronounced. Inflation measured by the CPI is now 3.3 per cent, but 2 per cent if the temporary increase in electricity prices is excluded. Inflation will fall later in the year. In the period of expansion in the Norwegian economy up to summer 2008, the increase in the interest rate contributed to keeping inflation low. During the crisis, we were able to reduce the interest rate markedly without an upward shift in inflation expectations. The real interest rate turned negative. The interest rate reduction rapidly stopped the fall in consumption and property prices. BIS Review 69/2010  7  The krone exchange rate has also by and large contributed to stabilising inflation and employment. In the short term, the krone exchange rate can fluctuate widely, and it depreciated in autumn 2008 because capital sought safe havens. This helped Norwegian manufacturing in the first phase of the downturn. Since then, the krone has appreciated considerably. This has dampened inflation prospects. Experience from the crisis in other countries indicates that monetary policy alone cannot ensure stable economic developments.
What is the right mix of central bank tools between buy/sell and lending/repo facilities? Where lending is preferred, which firms do we need to reach to maintain stability; how do ensure we  Page 4  can reach them (legally and operationally); and what terms and conditions should they face? What are the pros and cons of establishing standing facilities, whose terms and conditions are known in advance; versus simply ensuring we are ready to act in a more discretionary ways as/when required? Like the Beatles’ ‘glass onion’ in my title,[4] these lessons are not meant to be complex or novel. They bear a wholly intentional family resemblance to the Bagehot principle: a recognition that liquidity risk (in this case, arising in capital markets rather than banks) may threaten system-wide stability; that central banks may have an important role to play in providing a public backstop at scale; but they should do so on terms that minimise risks to public money and complement, rather than substitute for, market incentives. And they draw heavily on a literature on the Market Maker or Last Resort (MMLR) dating back at least to the start of the Global Financial Crisis. [5] As others have noted, despite this extended history, progress towards institutionalising these insights has been uneven. I hope that the BIS work, coupled with our sadly growing set of live case studies, can help accelerate that process. Let me elaborate a little on each of my four lessons.

The architects of this currency separation deserve great recognition, because everything began to return to normal soon afterwards and the previous uncertainty quickly faded away. It is no secret that they were inspired primarily by Rašín’s separation and its success, and they themselves later became a source of inspiration for currency separations in other economies gaining independence. All this tells us that the Czech nation is reasonably good at running its own macroeconomic, monetary and financial affairs. It has never had to resort to an exchange rate arrangement such as a currency board, and it has enjoyed the benefits of relative economic and monetary independence. Although at times the exchange rate of the koruna has been a source of domestic economic volatility, at other times it has done a great job of absorbing external shocks. Until quite recently, we were also using the koruna exchange rate as an unconventional monetary policy instrument to help us achieve the inflation target. Our ability to conduct our own monetary policy successfully is one reason why the Czech Republic is not currently seeking to adopt the euro any time soon. To sum up, the past 100 years have not been a series of random economic events. Despite all the discontinuities, there has been some continuity. In the same way that we inherit various physical and personality traits from our forebears, economists learn their craft from those that came before them and pave the way for those that come after. I am sure this conference will bear me out on that.
The Banks liquidity insurance facilities are, and will be available – but, as I have noted, these are for temporary usage during periods of stress, are set at an appropriate price and are not there to provide sustained funding for the banking system. Market-making operations by the central bank As part of its broader remit, however, a central bank is fundamentally concerned with maintaining conditions for the stable provision of financial services to the wider economy. This crisis has demonstrated that specific financial markets can sometimes fail and that raises the possibility of the central bank stepping in as “Market Maker of Last Resort” (MMLR). Acting as a MMLR is not something of which we – or other central banks – have had a lot of experience, but there are some basic principles which, if followed, can allow such operations to be run by the central bank consistent with its other objectives. My colleague, Paul Tucker, outlined these in a speech last year (Tucker 2009). The most relevant are: (i)  MMLR activity should not interfere with the setting of monetary policy by creating additional central bank money independent of monetary policy operations. 5  (ii)  Transactions should be at a discount to fundamental values so that the operations are unattractive to the markets in normal conditions. (iii)  The operations should help to re-start, or energise markets rather than replace them. These principles all apply to the Bank’s corporate asset purchases.

I will conclude here my brief address, wishing you fruitful debates and viable, useful solutions by the end of today. To all the foreign guests, may you enjoy your stay in Romania. Thank you. 2/2  BIS central bankers' speeches
The Banks liquidity insurance facilities are, and will be available – but, as I have noted, these are for temporary usage during periods of stress, are set at an appropriate price and are not there to provide sustained funding for the banking system. Market-making operations by the central bank As part of its broader remit, however, a central bank is fundamentally concerned with maintaining conditions for the stable provision of financial services to the wider economy. This crisis has demonstrated that specific financial markets can sometimes fail and that raises the possibility of the central bank stepping in as “Market Maker of Last Resort” (MMLR). Acting as a MMLR is not something of which we – or other central banks – have had a lot of experience, but there are some basic principles which, if followed, can allow such operations to be run by the central bank consistent with its other objectives. My colleague, Paul Tucker, outlined these in a speech last year (Tucker 2009). The most relevant are: (i)  MMLR activity should not interfere with the setting of monetary policy by creating additional central bank money independent of monetary policy operations. 5  (ii)  Transactions should be at a discount to fundamental values so that the operations are unattractive to the markets in normal conditions. (iii)  The operations should help to re-start, or energise markets rather than replace them. These principles all apply to the Bank’s corporate asset purchases.

The merits of such interventions need to be judged on a case-by-case basis. For tonight’s discussion I just want to argue that such decisions should be undertaken with the support of the democratic political system and should be implemented as a fiscal operation. Indeed, during this crisis, the UK Government has made a number of such interventions – such as the Enterprise Finance Guarantee Scheme and the Vehicle Discount or “Scrappage” Scheme. The Special Liquidity Scheme Now, as an aside, some keen watchers of central banks may want to argue that the Bank of England’s Special Liquidity Scheme (SLS) appears to have provided £ funding for the UK banking sector. The SLS, supported by a Government indemnity, was probably the single most generous liquidity support scheme introduced by a central bank during the crisis. 4 Its  2  In the past, when financial markets were less well developed, the Bank of England has played a part in selected industrial or financial market interventions (see Sayers, 1976), but that is not a role we have now. 3  The Bank of England issues banknotes of course, but these are monetary liabilities or “central bank money” which impact on the monetary stance. They are backed only by the highest quality assets, in order to maintain confidence in the integrity of the currency. 4  This was required given the relatively small capital base of the Bank of England – around £ ½ bn at end-Feb 2009.
A quarter century ago, a typical estimate of the neutral rate in the United States was 2 or 2½ percent—consistent with historical averages over the preceding half century. Since then, however, there has been a clear downward trend in neutral interest rates in the United States and other advanced economies, with current estimates ranging from 0 to 1½ percent.2 Three main global trends appear to account for the bulk of the decline in the neutral rate over the past quarter century. 3 One is demographics: populations are aging as people live longer and birth rates have fallen. The second is productivity growth, which has slowed around the world. 1/3  BIS central bankers' speeches  The third is the heightened demand for safe and liquid assets, which has led to a wider wedge between yields on safe government securities or central bank reserves and yields on riskier assets such as corporate bonds. Importantly, the onset of these trends preceded the global financial crisis and they have continued even as countries have recovered. Although there is a great deal of uncertainty about the neutral rate, and conditions may change, a reasonable assumption is that it will remain low— not far from current levels—for the foreseeable future.4 What does a low neutral rate mean for monetary policy and the anchoring of inflation expectations? When a recession hits, central banks may not be able to reduce interest rates well below their neutral level to stimulate the economy as warranted because of the effective lower bound on nominal interest rates.

This gathering is the first regional meeting of governors amidst the turmoil, and so we should take this opportunity to exchange views and reflect on how the financial environment which is undergoing a major transformation as we speak, will have implications on our roles as central banks. Looking at the overall picture, what is now going on in Wall Street may remind us of what happened in our region 11 years ago. At a glance, the root causes of both events are strikingly similar: investors taking excessively high risks creating asset price bubbles, against the background of lax prudential and monetary policy. With today’s financial environment, however, changes in the regulatory requirements, market players, business models of financial firms, as well as economic conditions have all played a part in escalating the impact of financial turmoil through the creation of a broader and deeper financial system. What is unfolding right now is taking place in the world’s largest economy with deepest capital markets, most sophisticated financial instruments – and, let me also add, the most advanced risk management tools. Given the increased complexity and magnitude of the current crisis, this calls into question whether the tools available at hand to policy makers are adequate in ensuring economic stability, the essence of our mission as central bankers. No matter how large the storm is, we have to lean against the wind and adhere to a set of principles which central banks have been practicing.
As Chart 7 shows, in the housing market for example there is a clear difference between the biggest UK banks and the rest; we saw a big increase in lending especially by foreign banks in the years 2006 and 2007; many of them have now withdrawn from the market. On top of that, of course Northern Rock and Bradford and Bingley have largely ceased new lending. As a result the continued lending of the main banks – and some smaller banks and building societies – is offset by reductions elsewhere. What matters for the economy as a whole of course is the total flow of credit. BIS Review 5/2009  3  The policy challenge Nearly all economic policy decisions work with a lag. So there is a limited amount we can do at this point to influence the path of output in the first half of this year (although there may be ways of mitigating the costs). The main challenge now is to prevent a deep recession being unnecessarily prolonged. I want to conclude by making three points about that challenge. First, the full impact of the measures of the last few months have yet to be felt. In the UK, the Bank has cut interest rates from 5% to 1.5% since October, the government has cut taxes and expanded spending and the banking system has been supported through recapitalisation and improved access to funding and liquidity. These measures will have a growing effect, even if we do nothing more.

John Gieve: Economic prospects and the policy challenge Speech by Sir John Gieve, Deputy Governor of the Bank of England, at the Cityco Breakfast Meeting, Manchester, 16 January 2009. *  *  *  Introduction One of the things that strikes me most on coming back to Manchester is the pace at which the fabric of the city changes – and I was looking at this yesterday from up on the 23rd floor. It’s not much more than two years since I was last here but in that time the city centre has added about half a million square feet of retail space, more than 1½ million sq ft of new office space and nearly 8000 extra hotel beds (a 40% increase). All this development reflects the attractiveness of Manchester as a location for inward investment and even more importantly the strong growth in businesses indigenous to the city, many of which are represented today. But while I gather that nearly a million square feet of office space has been let again in 2008 it is clear that in Manchester, as elsewhere, the past year has been increasingly challenging for businesses of all types and the prospect is forbidding. The severity and nature of the challenges we face particularly in the banking sector makes it very difficult to predict where we will be in a year from now. And the pace of change means that it is even more true today than usual that we cannot rely for navigation on official statistics alone.
Today, we can look back on a period of more than three years in which the ECB has successfully pursued a stability-oriented single monetary policy serving more than 300 million citizens. And we all have the tangible proof of Monetary Union in our pockets, following a highly successful cash changeover process which represents another historic milestone in the process of European monetary integration. Indeed, already now the level of cash payments in euro is close to 100% in all the countries of the euro area. This means that the cash changeover can be considered as good as complete, i.e. well before 28 February, after which date the legacy currencies of the euro will no longer be legal tender in any euro area country. Together with the Treaties founding the European Communities, the Maastricht Treaty is one of the most important and visionary legal texts in the history of the European integration process. With the euro, the Treaty offered tangible proof of what the vision of European Union is about, namely bringing the people of Europe closer together and ultimately facilitating their lives. Having been instrumental in laying the foundations for the euro, the Maastricht Treaty will remain vital and indispensable for the successful functioning of EMU. The medium-term macroeconomic policy framework laid down in the Maastricht Treaty has contributed to a stable macroeconomic environment, and will continue to do so. In addition, the Treaty provides for a clear allocation of responsibilities between EU institutions and Member States, as well as clear mandates for all involved.

The Governing Council fully supports all steps to avoid the occurrence of excessive deficits and all efforts to reduce the public debt and bring the fiscal stance into line with the stability programmes in individual member countries in order to ensure the credibility of the commitments made under the Stability and Growth Pact. In the same vein, we very much support the continued initiatives to foster structural reform. We welcome the focus placed on these issues in the context of the forthcoming Barcelona summit and we are looking forward to swift and determined delivery of essential structural reforms in the goods, services and labour markets to promote the euro area's growth potential. 2  BIS Review 9/2002
Svein Gjedrem: Financial crisis – lessons from the Nordic experience Article by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), in the Financial Times, 3 February 2009. *  *  *  With the financial crisis gathering strength and spreading to the real economy, it is instructive to learn the lessons from the Nordic crisis of the mid-1990s. There are some important similarities today: but also some important differences. The financial strength of the banks, and hence their ability to continue to supply a steady flow of financing, can be bolstered in either of two ways: by injecting capital; or by removing highrisk loans from the banks’ balance sheets – and in turn creating a “bad bank”. In the Nordic banking crisis 20 years ago, we did both, and learned three important lessons: First, government crisis resolution measures do not have to be costly for the taxpayer. The state injected equity capital, while private share capital was written down on the basis of a realistic assessment of loan losses. This ensured that the equity capital injected by the state could benefit from upside opportunities. In Norway, the state assumed 100 per cent ownership of the three largest banks. The board of directors and senior management in each bank were replaced. Then, in the years following the crisis, the state gradually sold its shares in the nationalised banks – at a profit. Second, it is not always necessary to take the bad loans off the banks’ balance sheets.

And financial regulation must have a less pro-cyclical effect. The objective must be to enable the banks to curb the impact of shocks on the economy, rather than to amplify them, as is the case now, where negative spirals are generated between the financial system and the real economy. Because of the global character of today’s financial crisis, the authorities must work in concert to find solutions, both in terms of recapitalisation of the banks and regulation of the financial sector. 2  BIS Review 12/2009