samchain/econo-pairs-v1 huggingface dataset:
Per Jansson: Time to improve the inflation target? Speech by Mr Per Jansson, Deputy Governor of the Sveriges Riksbank, at Handelsbanken, Stockholm, 3 December 2015. *  *  *  I would like to thank Mikael Apel for helping me with this speech. Since the global financial crisis, the world economy has entered an unusually uncertain and turbulent period. The recovery following the crisis has progressed surprisingly slowly in many countries, the European monetary union has been periodically exposed to major strains and there are currently a great number of questions surrounding the developments in China and several other emerging market economies, to name just a few examples. When a storm is raging around you, it is a major advantage to be travelling in a reliable and robust vessel. In terms of an economy, this often means having well-designed economic policy frameworks and clear and credible ground rules which provide robustness and stability. I would argue that the Swedish economy has been such a vessel for a long time now, and that this has been highly beneficial to us, both from a longer-term perspective as well as during and after the financial crisis. It is evident that the Swedish economy is currently regarded as fairly stable when studying the difference in long-term yields in relation to Germany. This difference has been small for almost twenty years, and has occasionally even been negative (see Figure 1). When compared to how the situation was previously, the difference is quite striking.

Even if upward and downward deviations were to level out in the really long term, there could be long periods where CPI inflation deviates from the target – long enough for there to be a risk of confidence in the inflation target being shaken. To put it differently, participants in the economy could begin to question whether the Riksbank will truly also stabilise CPI inflation around the target by stabilising CPIF inflation around 2 per cent. And they would have fairly good grounds for doing so, not just based on past events but also if we look ahead. If we assume in Figure 4 that CPIF inflation will continue to be around 2 per cent after 2018, then CPI inflation would overshoot the target for a long time, based on reasonable assumptions about the development of the repo rate. Even if the repo rate did not continue to rise to levels considered normal before the crisis, but instead slowed to the average of 2.3 per cent seen over the period 1998–2015, CPI inflation would overshoot the target for around five years in total. If the repo rate did continue to rise, it would take even longer, all things being equal, for CPI inflation to return to 2 per cent.12 Of course it is problematic if the formal target variable deviates from the target for such long periods, even if this is a result of a conscious policy.
Finally, the current account balance continues to be slightly in surplus and is expected to remain relatively stable over the coming years. The output gap in the economy has, since the start of the year, been in positive figures, and forecasts about its future course retain the prospect of the gap widening. Bear in mind that, moreover, set against the current recovery in the Spanish economy, the business cycle has tended to be a leading indicator of the credit cycle. Overall, the analysis performed warrants holding the CCyB at 0%. However, if the baseline scenario forecasts for the Spanish economy hold, in early 2021 several reference indicators would exceed the activation thresholds. If this macroprudential instrument is activated, the credit institutions concerned would have 12 months in which to comply with the requirement. This analysis, however, is conditional upon fulfilment of the baseline scenario forecasts which, at present, as I stressed earlier, are subject to numerous downside factors  9/10  of risk. If such risks were eventually to materialise, with a significant impact on Spanish GDP, the former diagnosis would consequently be altered. Allow me to conclude. The downward revision of global economic prospects is the main argument warranting some deterioration in the balance of risks to the stability of the Spanish financial system. This flatter economic activity may have adverse implications both for financial and real asset prices and for agents’ incomes, raising their levels of debt.

That marks a 50% reduction from the 2011 peak. Against this backdrop, banks should persist in their management efforts to enhance the quality of their balance sheets, which is a fundamental factor for the recovery of profitability in the medium term. The other lever in banks’ hands is to improve their efficiency, through a more appropriate management of their costs that does not limit their capacity to adapt to an increasingly more technified environment. In this respect, we should note that, in business in Spain, the 4/10  efficiency ratio at the individual level, without taking into account severance payments, has increased (worsened) by somewhat over 9 pp since 2014, to 58.8%. As to the composition of operating expenses, the weight of personnel costs has diminished, and that of IT and communications, outsourced services and amortisation has increased, reflecting to some extent the ongoing digitalisation and technological change at banks. It should be borne in mind that operating expenses are one of the most significant levers over which banks have direct control to increase the profitability of their business. In any event, it should also be stressed that Spanish banks’ efficiency ratio at the consolidated level, calculated as the ratio of operating expenses to gross income, is one of the lowest (best) in Europe. The actual and projected reduction in the euro area economy’s rate of nominal growth and, as a consequence, the fact that interest rates are going to be at lower or even negative levels for longer, may ultimately affect financial institutions’ profitability.
And at a time that the central bank would normally need to loosen policy to stimulate the economy, it needs tighter policy to ward off inflation. I am not as concerned about cyclical adjustments as I am about structural impediments to long-run growth in Brazil. During this time of remarkable liquidity and cheap credit, and despite a decade of high commodity prices and booming exports, Brazil failed to advance further market reforms. Mexico, on the other hand, has continued to build on its earlier reforms such as its commitment to free trade through NAFTA and other trade agreements. Mexico has secured the openness of its economy and ensured the global competitiveness of its manufacturing sector. Exports plus imports as a share of Mexico GDP reached 64 percent in 2012 while Brazil’s trade share of GDP was just 21 percent. Mexico is now the No. 2 exporter of auto vehicles to the U.S. after Japan and has been the top exporter of auto parts since 2001. BIS central bankers’ speeches  5  Mexico reforms and the Texas shale oil boom Mexico in the last year has logged impressive structural change. Your government stands as an example for many other nations, including my own. A dozen reform bills passed Congress and were signed into law in 2013, five requiring constitutional amendments. To put this feat in perspective, this government has accomplished more in the last year than the three preceding administrations combined.

I don’t want to reveal too much now, but there are a few points worth considering in this context. First of all is the importance of real-time settlement, which enhances efficacy and security. This has been a feature of payment intermediation in Iceland for a decade and a half, and it is where other countries are heading. It is therefore vital that we preserve that feature during the changes now taking place. Second, it is important to keep the cost of domestic payment intermediation down. New and more diverse solutions that, for example, work directly with core financial market infrastructure, such as bank deposits and the Icelandic Banks' Data Centre’s systems, could help in this regard. Third, it is important that it be impossible to stop domestic payment intermediation through some sort of foreign intervention. Fourth, there must be alternate routes in the system, in case anything goes wrong. This could call for some diversity in payment intermediation, using different types of technology. Electronic krónur could play a role in this. But the topic of electronic krónur gives rise to big questions that must be discussed — questions about the possibilities for the general public to use electronic claims against the Central Bank (and indirectly against the State) as a medium of payment instead of bank deposits, and questions about the repercussions this could have on the role and stability of the banking system. The discussion promises to be an interesting one, and it is just beginning.
In terms of solvency, the position of the Spanish banking industry has improved significantly in recent years, thanks to the reforms implemented in the industry, the strengthening of regulation and supervision, and the recovery in economic activity that has taken place in Spain. It should be recalled that the regulatory response to the financial crisis led to a substantial increase in capital requirements, as part of a raft of measures geared to minimising the probability of bank crises and to reducing their impact if they do occur, in particular in terms of the use of public funds. Not only were the own funds requirements increased for institutions but also the quality of own funds (i.e. their loss absorbing capacity) was improved, through the introduction of a number of more restrictive criteria for the determination of eligible capital, known as “common equity tier 1” (CET1). Thus, in terms of CET1, although the Spanish banking system still has a ratio below that of the main European countries, its strengthening in recent years has been notable: by more than one percentage point on average since its introduction in 2014. As at December 2016 this ratio for the Spanish banking industry as a whole reached 12.8%, exceeding the regulatory minimum requirements and standing not far from the average for banks supervised by the Single Supervisory Mechanism (SSM), which is close to 14%.

Currently, two of China’s biggest banks, namely Bank of China and ICBC have operations in Malaysia while Malaysia’s two largest banks, Maybank and CIMB have established their presence in China. Our Beijing Representative Office, being inaugurated today, also signifies an important milestone in the cooperation between the People’s Bank of China and Bank Negara Malaysia. Our two central banks have long cooperated in many areas of common interest in particular in the area of financial cooperation. In July of 2005, our currencies transitioned into a more flexible exchange rate regime at the very same moment. This enabled Malaysia to transition to this new regime effectively and efficiently. Bank Negara Malaysia has for more than a decade also participated in the fixed income market in China. We were among the first central banks in the world to be awarded the Qualified Foreign Institutional Investor (QFII) license to invest in China’s fixed income onshore financial markets and to be granted access to the China Interbank Bond Market. Our close central bank cooperation is also reinforced through the various regional platforms, including ASEAN+3, EMEAP and SEACEN. More recently, a series of measures have been undertaken to encourage the use of renminbi in the settlement of our bilateral trade and investment.
Adjustment of the imbalances in the economy is vital in order to soundly underpin medium and long-term growth, although in the short run, balance-sheet write-downs in the general government sector, at credit institutions and in households and firms may check any take-off in spending. Fortunately, the sluggishness of domestic demand is being offset by the buoyancy of external demand. The thrust of exports has been substantial and should continue to be so, whereby attaining further gains in competitiveness will be vital. This is the key variable for making the adjustment of the imbalances compatible with the firming of a more dynamic recovery. If this combination of adjustment and growth were to successfully take root, the Spanish economy could see private-sector deleveraging, the stabilising of public finances and the restructuring of the banking system lead to an increase in confidence, softer financial conditions and, in sum, an improved economic outlook that would boost investment and employment. The role of economic policy remains pivotal for steering the adjustment process. In the case of fiscal policy, the measures adopted last spring marked the starting point. But substantial challenges lie ahead and determination will be required to define and specify the measures that allow public finances to resume a stable path. In the short run, the deficit target for 2011 is ambitious, as it entails a reduction of more than 3 pp of GDP to 6%. But, at the same time, compliance is crucial in view of the financial markets’ extreme sensitivity to the course of public finances.

Finally, in the financial field, the restructuring initiated a year earlier was accelerated to overhaul the savings bank sector. Thanks to these measures, the recovery of the Spanish economy remained on track, although it continued at a slow pace, due to the very need to undertake unavoidable adjustments. In this respect, the weight of real estate activity in output continued to decline and the external deficit was also further corrected. There was no significant progress in inflation, but this was due to the influence of temporary factors, such as the rise in VAT in  2  BIS central bankers’ speeches  July last year and the hike in oil and other commodities prices. Once these effects have worked through, inflation should fall again in the coming months, although for this to happen it will be vital no second-round effects should come about, as these would harm the economy’s competitiveness. Write-downs of the balance sheets of non-financial corporations and households have continued, with a slight decline in the outstanding balance of credit extended to these agents. In the case of non-financial corporations, behaviour has differed across the productive sectors, with modest increases in financing to companies other than those in real estate development and construction. In the case of households, deleveraging will no doubt be slower, insofar as the bulk of household debts are in mortgage loans extended over long terms, whereby repayment will be gradual.
François Villeroy de Galhau: France and Germany facing European challenges in the crisis Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Bundesbank conference “Banking and Payments in the digital world”, Berlin, 11 September 2020. * * * Ladies and Gentlemen,  1. To this day, the coexistence and complementarity of central bank and commercial bank money as settlement assets has structured the payment landscape and preserved the stability of the monetary system. Yet this structure is increasingly being questioned. • Our payment landscape is based on the coexistence and complementarities of central bank money and commercial bank money as settlement assets. Their respective roles are clearly assigned: central bank money ensures the stability of the financial system while the multiplicity of issuers of commercial bank money preserves competition and innovation in the provision of financial services. Their interplay and their interchangeability at par value ensures the safety and efficiency of the financial system. • However, the balance between these two forms of money cannot be fixed once for all, as it depends on changes in payment habits, the evolution of the financial ecosystem and the emergence of new technologies. • In the retail space, the digitalisation of the economy and the development of cheap, highly effective digital payment solutions displaying innovative features (e.g.

2/3  BIS central bankers' speeches  ** Since we are in Berlin, allow me to conclude with a European perspective: Europe has not developed global social networks like some important countries. This raises the stakes for the European authorities, if they want a stronger, more autonomous and more innovative European financial sector, to succeed in developing a coherent strategy. We do not have much time to decide this consistent European payment strategy, including EPI and a possible CBDC: one to two years. This makes our today’s discussion still more welcome. 3/3  BIS central bankers' speeches
Even adjusting for that effect though, unit labour costs look broadly flat – much below the 2% rate of increase we need to meet the inflation target in the medium term. The big surprise, therefore, for the MPC – and it is a positive, if puzzling, development – has been the extent to which employment has been able to grow without generating clear inflationary pressure. Understanding why that has happened and how long it will persist is, in my view, now key to deciding policy. One possible explanation is simply a longer-than-usual lag between falls in unemployment and pay pressure emerging. Once you take into account productivity, the unexplained weakness in wages only really materialised over the last three quarters, a period over which unemployment was falling very rapidly. Some survey measures suggest the pay of newly hired employees is growing at a much faster rate, of between 2% and 6%, rather than the 1% rate seen across employees as a whole in the official data. On this view, a rapid pick up in average pay levels is in prospect, once more and more workers start to shift jobs and as pay of existing employees is adjusted in annual pay rounds. The parable of the rock pulled by the elastic band is a very relevant one in economic policy making: the rock may not move for a long time, but eventually it will. And the longer it takes to move the faster the move is likely to be.

The big lesson from the 1970s was that weakness in real incomes and price movements, which drive a wedge between consumer prices and output prices, lead to pressure for increases in pay to “catch up” on the lost income: or as it is sometimes called “real wage resistance”. The end result is more inflationary pressure for a given amount of unemployment. Put differently, to keep a lid on inflation, unemployment has to be higher following periods of pressure on real incomes. The current reduction in real incomes has been as big as we’ve seen for nearly a century. Real wages are still almost 9% below their pre-crisis peak. That is a fall of around 20% relative to the pre-crisis trend. Following a year of strong growth and a very rapid fall in unemployment, this would suggest workers would now demand some catch up in pay. However, there appears to be little evidence of real wage resistance – the sharpness of the recession and the years of austerity that have followed it, appear to have caused a shift in the psychology of UK workers. There appears, for the present at least, to be an acceptance that pre-crisis pay levels are no longer achievable. Real wages have proved to be remarkably flexible and, as a consequence, unemployment has been able to drop quickly without inflationary pressure on pay emerging. To complete the picture, the fall in unemployment has included a high number of long-term unemployed, who probably drag less on pay.
We are convinced that our banks are better able to withstand a crisis today than they were ten years ago. What is more, banks’ management bodies and the supervisory authorities alike now have a better understanding of how to assess risks. The comprehensive implementation of the agreed measures will further improve the stability of our financial system. We will still have systemically important banks in the future. However, these must no longer be too big to fail; that is to say, the state and taxpayers must no longer have to fear being held hostage. The new banking regulations therefore contribute to reducing risks, but they also take into account both the considerable economic importance of Switzerland’s banking sector and our interest in having a significant financial centre. I would like to cross over here, if I may, to the sovereign money initiative. The authors of this initiative hope that, if adopted, it would result in a more stable financial system. However, switching to an untested sovereign money regime would radically transform Switzerland’s tried-and-tested financial framework. Given the lack of empirical data and comparable systems worldwide, such a transformation risks plunging Switzerland into a period of great  11  From the end of 2019, both of Switzerland’s big banks must have a Leverage Ratio of at least 5.0% and an RWA Ratio of at least 14.3% on a going-concern basis, excluding the countercyclical capital buffer. Added to this are the gone-concern requirements in the same amounts (without taking any reductions into account).

Together these measures will strengthen the resilience of the banking sector, which can surely only benefit our economy and enhance our prosperity. Allow me to conclude by taking this opportunity, also on behalf of my Governing Board colleagues, Fritz Zurbrügg and Andréa Maechler, to thank our employees for their hard work and dedication. We also thank you, our shareholders, for your loyalty to the SNB and your faithful support. Let me also thank our young guests from Gymnase intercantonal de la Broye in Payerne and Kantonsschule Schüpfheim in Canton Lucerne for their interest in monetary policy and the SNB. Thank you all for your attention. Page 8/8