samchain/econo-pairs-v1 huggingface dataset:
IMF-SNB 8TH HIGH-LEVEL CONFERENCE ON THE INTERNATIONAL MONETARY SYSTEM CHALLENGES FOR MONETARY POLICY AND THE GLOBAL SAFETY NET IN AN EVOLVING GLOBAL ECONOMY Baur au Lac, Zurich, Switzerland, May 8th, 2018 Remarks by Mario Marcel, Governor of the Central Bank of Chile ∗ PANEL I: Challenges for Monetary Policy from Global Financial Cycles I would like to thank the organizers for the opportunity to discuss the evolving relationship between Global Financial Cycles and monetary policy at the national level. This is a topic especially important to emerging market economies (EMEs) like mine, for which economic and financial openness went hand in hand with strengthening its macroeconomic policy framework over the last 30 years. Such external openness leads analysts to frequently rank my country very high in terms of exposure to international trade and financial shocks, only to see such shocks having a milder impact on the economy when they happen. While we believe that such gap is to a large extent due to our appropriate monetary and fiscal policies and the institutions supporting them, we are aware that this does not mean full insulation from global developments, including, of course, Global Financial Cycles. Structural differences between advanced economies (AEs) and EMEs may be relevant to the nature and impact of Global Financial Cycles EMEs tend to depend more on foreign financing, due to lower domestic saving capacity. At the same time, EMEs usually have shallower domestic capital markets. These two factors make EMEs particularly vulnerable to changes in international capital flows.

Thanks to deregulation, more Swedes have been able to borrow at a reasonable rate of interest, making it possible for a larger number of people to own their own homes and to better distribute their consumption over their lives. In this respect developments in Sweden have largely followed those in the US and the UK. Of course such deregulation - or rather reregulation - is not problem-free. The fact that a greater number have the opportunity to borrow also implies increased risks in the financial system. But in the absence of risks, growth opportunities also decrease. The important thing therefore is that the risks can be managed in the event of a crisis, which, for instance, requires strong consumer protection. Here Sweden has also been at the fore by being the first to publish regular stability reports for the financial sector, with a view to avoiding any reoccurrence of a systemic collapse similar to that at the beginning of the 1990s. There are now signs on the Continent that the pace of financial market reform has increased. This is partly because the EU Member States, as a part of the Lisbon strategy, have agreed to implement the Financial Services Action Plan. Only last week new steps were taken to harmonise securities trading between the EU Member States through the signing of the Investment Services Directive. This affords both private investors and institutions greater opportunities to trade on exchanges other than those in their own country.
The cause of this recession—a global pandemic—means that our economic future will be determined in large part by the path of the virus. It’s impossible to know exactly how and when workers and businesses will be fully back to work and when consumers will return to the businesses that are open. Despite the uncertainty, I’m going to spend some time today discussing what the scale of the challenge looks like for New York State, and for the U.S. economy as a whole. I’m also going to outline the Federal Reserve System’s response. The Fed is well-known for setting interest rates. But we play a number of other roles, and have a key responsibility for ensuring that the financial system is working to support the economy, which has been crucial during this crisis. Before I continue, let me give the Fed disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. A Diverse State One of the particular strengths of New York State is its diversity—and this is especially true from an economic perspective. In Western and Central New York there are top-tier universities, manufacturing businesses, a thriving professional services industry, as well as popular tourist destinations. Since the 2008 financial crisis, the declining population trend in Upstate New York of earlier decades had largely stabilized. In recent years, new businesses had sprung up and unemployment had fallen to historic lows.

In view of an increased inflationary pressures environment, we have embarked on a gradual process of monetary policy normalisation, aimed at timely returning inflation to the target and at a rather low costs to the economic activity. Nevertheless, the sound balance sheets of households and enterprises, the further expanded Albanian exports, and the decreased uncertainty in response to the expected reduced inflation will continue to feed the economic growth, in turn the latter is expected to remain in positive territory. The sound position of banking system is an added guarantee for the expansion of the economic activity. The healthy and liquid financial balance sheets of the banking sector guarantee that the latter will continue to funding the Albanian households and enterprises, by supporting the expansion of both consumption and investments as well as meeting the temporary needs for liquidity. The coverage and transmission in an objective manner of news to public is an important factor in meeting our objectives for a stable economic and financial environment. In this light, I am pleased to see that the media coverage of the economic and financial developments in Albania and abroad has been fully in compliance with our  1/4  BIS - Central bankers' speeches  expectations. For this purpose, I would like to thank you for the professionalism and integrity you have demonstrated throughout 2022. In addition, I reaffirm that the Bank of Albania is completely open to listen to your opinions and suggestions for further heightening our collaboration.
Philipp Hildebrand: SNB’s performance against the background of financial market developments Introductory remarks by Dr Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 15 December 2005. *  *  *  Developments in the financial markets The international financial markets have been dominated in recent months by four key developments. Long-term capital market yields have improved; the equity markets have, on the whole, exhibited very positive developments; the US dollar has continued the uptrend which set in at the beginning of this year; and the gold price has climbed sharply. The movements of the past few months in the international capital markets are largely attributable to economic developments and US monetary policy. Long-term dollar interest rates climbed significantly in the second half of the year thanks to the robust economic climate, the positive outlook in the US and the continued normalisation of monetary policy by the Federal Reserve. A rise in yields was also observed outside the US. The spread between US and European capital market rates, however, remained considerable. This is not least reflected in the differing business cycle phases of the US and European economies. Despite the improved economic outlook and higher oil prices, inflation expectations have, on the whole, remained moderate on both sides of the Atlantic. The three major economic areas – US, Japan and Europe – exhibited divergent equity market developments. While the US equity market largely maintained its sideways trend, the European indices firmed substantially.

Only by doing so, we could lay the grounds for a second assessment in a three-year time, which shall not only observe the accomplishment of these recommendations, but also determine new priorities towards financial system development. Thank you! 2  BIS Review 88/2005
Yet the stability and growth pact, which helps to ensure budget discipline in Euroland, imposes restrictions on the fiscal policy of the individual members. By contrast, interventions in the field of fiscal policy on a European level would hardly be in contradiction to the stability and growth pact. For a long time to come, however, the Union's budget is still likely to be too modest to bring about the desired effects within the Union by means of a stabbility-oriented fiscal policy. For the time being, fiscal policy is therefore not a realistic option. Finally, one should take into account that by its very nature a monetary union promotes the division of labour between the participating countries. Instead of being evened out, differences between countries may thus become more acute. In fact, regional specialisation in the United States is more pronounced than it currently is in Europe. Major industries have joined together in national clusters - car manufacturers in Detroit, software producers in Silicon Valley, the film industry in Hollywood. One might argue, in this context, that the Fed in Washington faces the same problems as the ECB in conducting a common monetary policy that fits economically diverging regions. However, there are two remarkable differences between the United States and Euroland. First, the US labour market exhibits a higher degree of flexibility, and second, the United States are a federal state with a large budget and fiscal policy power of its own. The European Union (EU) is still far removed from all this.

Financial crises are much more likely to be associated with corrections of asset values where asset purchases have been financed with debt rather than equity. Aggregate global debt – public, private and financial – is now around 320% of global GDP, close to its record highs. Excluding financial sector debt, the debt of the real economy is around 240% of global GDP.6  But aggregates can only tell you so much. And they can hide a multitude of sins. We need to need to look not just at the level of the total, but the growth rate and sustainability. And we need to drill down into the composition to see where the risks are most prominent. Growth, level and sustainability  Research suggests that it is the growth rate of debt rather than its actual level that is the leading indicator of financial crises. Bank of England work based on 130 downturns in 26 advanced economies since the 1970s suggests that a rapid build up of debt is the best early warning indicator of a recession.7 Other academic work supports this conclusion.8  The actual level of debt matters rather in determining the depth, as opposed to the probability, of the crisis. So we need to look at the growth rate as well as the level. 6  See IIF Global Debt Monitor. Of the 317% of global debt to GDP, 60pp is household debt, 90pp is to non-financial corporates, 86 is government, and 80pp is financial corporates.
I tell the Bank’s new entrants I can promise them only one thing: they will be telling their families and friends about this moment in history and, uniquely, they can write its next chapter. As a public servant, this is as good as it gets. Any lengthy career in public policy will inevitably be punctuated by crisis. In my case, crises have provided not just the punctuation marks, but most of the words, sentences and paragraphs too. In public policy, crises are the ultimate learning experience. They are also the moments when the Overton window of opportunity is widest and the opportunity for change greatest. Crises are moments of challenge and opportunity in equal measure. I am very fortunate to have experienced plenty of both. My time of the Bank has been evenly split between its twin statutory functions, monetary and financial stability. These functions, embedded in the Bank’s Royal Charter in 1694, remain its statutory centrepiece today. (The Bank’s third objective, fighting the French, has by contrast tended to be downplayed.) Over the intervening 327 years, both monetary and financial stability have had their fair share of challenges and opportunities. These have perhaps come thicker and faster over the past 27 years than the preceding 300. I want to offer a few retrospective thoughts on the evolution of monetary and financial stability over the past 30 years before turning to central bank communications, a crucial ingredient of both. Bank of England policy frameworks and practices have undergone an astonishing transformation over that period.

Risk had been dispersed and diversified to the four winds, courtesy of an ever-more interconnected global financial system and ever-more sophisticated financial instruments.17 The Great Moderation in the economy also meant finance faced fewer shocks than in the past. 13  Haldane and Kruger (2001). Fischer (1999). 15 Evanoff et al (2015). 16 Taylor and Schularick (2012). 17 Greenspan (2002). 14  11  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  11  When it came to assessing risks to the financial system, unlike with monetary policy, there was no off-the-shelf model. In pursuit of one, I started looking to other disciplines for inspiration. From the mid-2000s, I began discussion with a set of scientists – physicists, evolutionary biologists, epidemiologists – on the models they used to understand complex, adaptive systems. I was hoping they might provide some analytical clues when it came to modelling the complex, adaptive world of finance. I was in luck. There was a well-developed field of complexity science, with applications in most of the natural sciences and some of the social sciences. Economics and finance was a notable exception. Once I had retro-fitted these models to the financial system, I wrote a note and sent it to the Governors in 2005. It was titled “Public Policy in an Era of Super-Systemic Risk”. It made some bold claims about financial system resilience, most of which jarred with the prevailing orthodoxy.18  Financial integration, it argued, was a double-edged sword. It was fantastic for risk-dispersal when the good times rolled.
Moreover, the dissemination of the Bank of Thailand's data to the public has been improved through the access to information through the web site and the use of the Interactive Voice Response. BIS Review 6/2001  5  The various improvements to the Bank of Thailand have also started to show results. In this regard, the Bank of Thailand was invited by the Bank for International Settlements (BIS) to hold shares with other prominent central banks in the world. But the work does not end here. The improvement within the Bank of Thailand must continue to ensure the Bank is an organisation which is ready to learn and develop itself as well as being the main economic organisation with accepted international working standards. More importantly, it is necessary to have an ability to maintain monetary and financial institution stability effectively and have the confidence of the public. In 2001, we projected the economy to grow at around 4 %, a similar rate compared to this year. In the first half, economic activity is projected to be somewhat stabilised. However, given a cleared economic and political environment, higher growth is anticipated in the second half of the year. Following the adoption of an accommodative monetary policy stance by the Bank of Thailand to foster economic growth, which has enabled a continued downward adjustment of market interest rates, domestic spending is expected to pick up next year, as there is usually a lag of 1 – 1.5 years before monetary policy will result in increased spending.

Philipp Hildebrand: Globalisation and current developments in the financial markets Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Swiss Institute of International Studies, Zurich, 13 March 2008. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Fundamentally, globalisation is not a new phenomenon, and yet the world has changed dramatically in the past twenty years. This is also evident in financial markets, where, since August 2007, a local event like the correction in the US residential property market has rapidly developed into a global event. We are now experiencing the first truly major crisis of financial globalisation. The longer the crisis lasts, the harder it will be – but also the more important – to keep in mind the advantages of financial globalisation and preserve them in the long run. There is a need for regulatory correction, and such a need will remain in the future. The existing system of regulation and supervision should be further improved. The regulation of liquidity and equity, in particular, needs to be fine-tuned, strengthened and adjusted to the latest developments in financial markets. However, it is possible that more will be needed than just the fine-tuning of regulations. The buffers in the financial system have to be strengthened. In simple terms, what is ultimately required is that international banks strengthen their capital backing. At the same time, bigger liquidity cushions are needed.
Russia’s invasion of Ukraine exacerbated the supply-side problems and led to a further surge in prices for a range of commodities. Since summer, reduced gas supply from Russia to Europe, combined with an unusually hot, calm and dry summer, has pushed up gas and electricity prices to very high levels. This has also led to higher energy prices in Norway. Chart: Inflation is broadly based With Norwegian businesses facing higher costs for labour, energy and intermediate goods, many are now raising their selling prices for goods and services. In recent months, consumer price inflation has been rising rapidly. In the year to September 2022, consumer prices measured by the CPI rose by close to 7 percent. Without the electricity cost support package for households, inflation would have been nearly 10 percent. The rise is broadly based across a range of goods and services, both imported and domestically produced. This chart shows the change in prices across 60 CPI sub-indices, with 44 of them having shown a price rise of more than 2 percent over the past 12 months. And for many of them, the rise in prices is now very high. The rise in prices for 16 groups has exceeded 10 percent. Energy and food prices have shown a particularly sharp rise, but we also see a pronounced rise in prices for some services such as air travel and hospitality, and goods such as books and household articles.

Under current circumstances, increasing government savings and adhering to fiscal discipline are essential to control the risks brought about by the current account deficit rising on the back of the decoupling between domestic and foreign demand. Our inflation forecasts take the fiscal projections of the MTP as given. A revision in the monetary policy stance may be considered, should the fiscal stance deviate significantly from this framework, having an adverse effect on the inflation outlook. In the upcoming period, monetary policy will continue to focus on sustaining price stability. To this end, we will meticulously evaluate the impact of macroprudential measures taken by the CBRT and other institutions on the inflation outlook. Fulfilling commitments to fiscal discipline in the medium-term and strengthening the structural reform process would facilitate the relative improvement in Turkey’s sovereign risk, and thus bolster macroeconomic and price stability. Maintaining fiscal discipline will also provide more flexibility for monetary policy and contribute to social welfare by keeping interest rates at low levels permanently. In this respect, timely implementation of the structural reforms envisaged by the MTP and the European Union accession process remains to be of utmost importance. Thank you for your attention. BIS central bankers’ speeches  15
During the period between December 2012 and December 2013, when the repo rate was unchanged at 1 per cent, I advocated interest rate cuts of 0.25 percentage points. Is it reasonable to believe that such a small cut would have any tangible effect on developments? Of course, we cannot know with any great degree of certainty what would have happened if monetary policy had been different than it was, but we can use economic and statistical models to assess the consequences. An analysis using the Riksbank’s macro model Ramses15 indicates that a repo rate that was 0.25 percentage points lower during most of 2013 would have meant that inflation would have been a couple of tenths of a percentage point higher today (see Figure 5). This may not seem much, but it corresponds approximately to the downturn in inflation we have observed since the start of 2013 and these are important tenths of a percentage point in a situation where inflation has already been low for a long time.16 The effect could be greater if one took into account the fact that a lower repo rate in 2013 would probably have affected expectations of future monetary policy during 2014 and onwards. Moreover, I was not merely advocating a lower repo rate, but also a lower repo-rate path during this period. A lower repo-rate path should have affected expectations of future monetary policy in an expansionary direction and thereby contributed further to higher inflation. 14  Swedish Bankers’ Association (2013).

When the krona appreciates, this has both a direct effect on inflation, which is pushed down when import prices fall, and an indirect effect in that the demand for Swedish-produced goods and services is affected negatively. Strong krona contributes to low inflation The possibility for monetary policy to steer the exchange rate is limited, but there is nevertheless reason to believe that the krona has become stronger than it would otherwise have been because of our leaning against the wind. If foreign exchange market participants see an increased difference between the yield on a Swedish treasury bill and the yield on foreign equivalents, the Swedish treasury bills and thus the Swedish krona will be more attractive and therefore more expensive – that is, the krona will appreciate. Although it is difficult to see clear links between observed exchange rates and interest rate differentials, a positive interest rate differential usually coincides with a strong krona (see Figure 1). The difficulty in seeing clear links is due to expectations having considerable significance for trade on the financial markets. The market rates and the krona rate do not change when the Riksbank makes its repo-rate decisions, they change when market participants’ expectations of future repo-rate decisions change. Figure 1.