samchain/econo-pairs-v1 huggingface dataset:
Monsieur Trichet éclaire les conditions du succès de l’euro Discours de Jean-Claude Trichet, le Gouverneur de la Banque de France, à la conférence de la Banque Centrale de Hesse tenue à Francfort le 22/2/99. Monsieur le Président, Mesdames et Messieurs, c’est un grand plaisir et un honneur pour moi d’intervenir ici, à l’invitation de la Landeszentralbank de Hesse et du Center for Financial Studies de l’Université de Francfort, en compagnie de conférenciers aussi remarquables. Aussi je tiens à vous remercier de me donner l’occasion d’évoquer avec vous l’Union monétaire européenne et l’avénement de l’euro. Il y a un peu plus d’un mois, s’est produit un événement unique dans l’histoire de l’Europe. L’euro est né et le caractère irréversible de ce changement a convaincu un nombre croissant d’acteurs de la scène politique et économique que le succès de l’euro était une nécessité pour l’Europe et le reste du monde. Il représente la clé de voûte du marché unique européen qui assurera la prospérité en Europe. Mais, pour rendre ce succès durable, nous allons devoir affronter, aujourd’hui et demain, un certain nombre de défis. Les banques centrales sont au cœur du passage à l’euro, à la fois au niveau européen et au sein de leurs économies nationales.

Les chefs d’entreprise peuvent répartir ces emplois sur différents sites et pays en fonction de la compétitivité relative de ces sites. Il faut donc que les dirigeants de chaque économie nationale suivent plus attentivement encore qu’auparavant les indicateurs de compétitivité tels que l’évolution des coûts unitaires de production, des dépenses des entreprises, et l’environnement fiscal et réglementaire. Contrairement à la période antérieure à l’euro, toute perte de compétitivité ne s’affichera pas rapidement sur les écrans radar que sont les comptes extérieurs et les marchés de change. Les dirigeants doivent donc redoubler de vigilance sur le suivi des autres indicateurs. Les erreurs de politique économique risquent, en effet, être sanctionnées d’une façon plus lente et plus insidieuse, par la montée du chômage et le ralentissement de la croissance. B. Les entrepreneurs, les consommateurs et l’euro. l’ensemble des citoyens doivent s’approprier  - Avant toute chose, l’indépendance monétaire, la sagesse budgétaire, les réformes structurelles et la compétitivité des politiques économiques seront vaines si elles ne se traduisent pas dans le comportement des agents économiques eux-mêmes, c’est-à-dire nos concitoyens, — ménages et consommateurs, mais aussi salariés, ingénieurs, entrepreneurs individuels, chefs d’entreprise. C’est, en particulier, la raison pour laquelle la Banque souhaite délivrer aux entreprises un message très direct : “ L’introduction de l’euro n’est pas une question tactique mais une question stratégique ”. Avec le passage à l’euro, il ne s’agit pas seulement de remplacer une expression monétaire par une autre et de réécrire des programmes informatiques. C’est l’ensemble des fonctions de l’entreprise — industrielle, commerciale, financière, etc.
Yet, a strong economy and a sound fiscal position at least provide the means to devote resources to help address these ongoing problems. This turnaround of New York City illustrates that reviving a city in trouble is indeed possible. There are some useful lessons from New York City’s experience. First, it is often darkest before the dawn. Cities in fiscal distress are like individuals suffering from addiction: they often have to hit bottom and reach out to others for help before they can begin to recover. New York City hit bottom in 1975, and that created the impetus for reform. Second, in such situations, cities often have to give up fiscal control for a time. Accepting a Control Board and operating under its mandates was a painful, but necessary, step toward rebuilding the city’s fiscal health and regaining access to financial markets. Third, when sound reforms are implemented it still takes a long time to achieve fruitful results, so it is important to stay the course. Fourth, although a strong economy, good fiscal position and transparency in government will not automatically solve every problem, they provide a strong foundation. So, what does the future hold for New York City? An important aspect of a city’s vitality is the ability of its residents to develop the skills necessary to be successful and to achieve their dreams. A big asset for the city is its access to affordable education.

Furthermore, economic agents should not be given any cause to act on the basis of expectations that central banks would insure financial markets against considerable losses. Otherwise, there would be serious moral hazard problems and the public would hold the central banks accountable for specific developments in financial markets such as the performance of the stock market. This might seriously impair the central banks' goal of pursuing price stability, and thus their credibility. Central banks also face considerable problems in terms of identifying financial bubbles. After all, a bubble can only be confidently identified as such once it has burst. 5  J.E. Core, W.R. Guay and D.F. Larcker, “Executive Equity Compensation and Incentives: A Survey”, Federal Reserve Bank of New York, Economic Policy Review, April 2003, pp.27-45. 6  A. Greenspan in his Testimony before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, 16 July 2002; see also A. Greenspan, “Stock Options and Related Matters”, remarks at the 2002 Financial Markets Conference of the Federal Reserve Bank of Atlanta, 3 May 2002. 7  P. Maidment, “In Nothing We Trust”, Forbes Magazine, 7 January 2001; F. Fukuyama, “Trust: The Social Virtues and the Creation of Prosperity”, Free Press, 1995. 8  F. Fukuyama, “Social Capital and Civil Society”, 1 October 1999, paper presented at the IMF Conference on Second Generation Reforms; J. Sobel, “Can We Trust Social Capital?”, Journal of Economic Literature, Vol. XL, March 2002, pp.139-154.
As I see it, it is important to try to come to a decision on the basis of many different sources of information. Forward rates are an important source but we need to better understand risk premiums and their variations over time. Monetary policy expectations and the krona exchange rate The debate on the role of market expectations in monetary policy has also to a great extent concerned how they affect the Swedish krona. Economic theory says that when there is an upward shift in monetary policy expectations in Sweden then, all else being equal, the krona should strengthen at the same time as Swedish interest rates increase relative to interest rates abroad. We should, in other words, see a positive link between the strength of the krona and the difference between Swedish and foreign interest rates. 4  There are studies showing that asset purchases by the Federal Reserve during the financial crisis put strong down-ward pressure on risk premiums, see J. Gagnon, M. Raskin, J. Remache and B. Sack, 2010. Staff Report No. 441, Federal Reserve Bank of New York, “Large-Scale Asset Purchases by the Federal Reserve: Did They Work?”  5  For example, risk premiums were negative in the autumn according to the method described in D.H Kim and J. Wright (2005), ”An arbitage-free three-factor term structure model and the recent behaviour of long-term and distant horizon forward rates, Board of Governors of the Federal Reserve, Finance and Discussion Series, 2005–33.

In practice, however, the expectations hypothesis hardly holds water and this is due to the risk premiums that reflect all the other factors also affecting interest rates. There is a notion that average risk premiums should be positive and increase as the period of maturity increases as investors want to be compensated for the price risk associated with holding long-term bonds. 2 In addition, risk premiums are affected by supply and demand on the bond market, which can have either positive or negative effects on risk premiums. In actual fact it is probable that risk premiums can be positive as well as negative and that they fluctuate a great deal over time in a rather irregular way. This makes it difficult to adjust market rates in a way that excludes the effects of risk premiums and reveals expectations concerning future interest rates. Normally, it may be possible to come reasonably close using standard adjustments, but when, as in recent years, the markets are highly uneasy and uncertain at the same time as the central banks are actively influencing price formation using various unconventional measures, it is very difficult to reliably estimate expectations. But is it important for us to be able to distinguish monetary policy expectations from the other factors that affect the interest rate? The answer is that it matters when evaluating the alternative courses of action for monetary policy.
So I will focus today on some wider implications of the last few years for the way we conduct economic and financial policy. In doing so I am well aware that we are not yet at the end of the story. We don’t know how deep and prolonged this recession will be or how soon and completely financial markets will recover. So it is too early to reach settled conclusions on causes or cures. So I offer this as an interim report: seven lessons I have drawn from my experience of the last three years. A settled consensus But let me set out first the position as it appeared in 2006. For much of my life, the design of economic policy has been at the centre of both political and academic contention. In the UK, over the twenty years following the breakdown of the Bretton Woods arrangements, we tried everything from prices and incomes policies to several varieties of monetary targets and finally fixed exchange rates and they all came to a sticky end. But the approach we adopted after our ejection from the ERM was guided by modern monetary economics and set us on a course which gathered growing support across the political spectrum and in markets. Macroeconomic policy The new consensus was based in Britain on the experience of repeated bouts of inflation and the three painful recessions which had been required to bring it under control. That experience hammered home the lesson that there was no trade off between inflation and growth.

In taking this action, the FPC took a view on the risks if the distribution of mortgages shifted towards a large share of high loan to income loans. We intended to limit the risks arising from increasing household indebtedness and the macroeconomic vulnerabilities this creates. The action was forward looking – limits were set at a level above the proportion of such mortgages being issued at the time and indeed have not subsequently been reached. And that brings me to my final point. The literature and theory of macroprudential policy is as yet relatively under-developed and concentrates on prudential regulation of banks and their role in the credit cycle. But it is apparent from my short time on the FPC that the time-varying risks we need to address go wider than the banking system. The action I have just described  2  6  See “The Bank of England’s approach to stress testing the UK banking system”, October 2015. BIS central bankers’ speeches  on housing is one example. The growing attention being paid to potential risks from market as opposed to bank-based finance is another. The time-varying macroprudential policy maker needs to look wider than the banking system. Conclusion To conclude, while the credit cycle remains hard to identify with the precision of a physicist, a key element of macroprudential policy is try to assess it and to address the risks that build up in the financial system over the cycle.
Particularly worrisome is the further increase of inactivity of women as the region faces shrinking working age population, due to the two factors: first, adverse demographics, and second, immigration. We all well know that the labor force is one of the key determinants of economic growth. There are empirical studies that show that higher inclusion of women can bring a number of benefits. And not only for women, but for the whole society. Higher inclusion of women is associated with 10% higher GDP growth in advanced economies and 30% in developing economies. Focusing more closely on the Western Balkans, a World Bank study estimates that 2/3  BIS central bankers' speeches  countries in the region each year lose on average 18% of their total GDP, due to the gender gaps in the labor market. And about two thirds of the cost of lost GDP or income in the society can be explained by the lower participation of women. Higher growth can stem not only from the higher quantity of labor force that we need in this new environment, but also, and even more importantly, from the new quality that it can bring on board from different skills and psychological virtues that women bring in, such as: higher risk aversion, thoroughness, pragmatism, empathy. Further, more diversified institutional environment tend to lead to more optimal and effective decision making. For example, Credit Suisse analysis finds that Fortune 500 companies with female representation perform better than those without.

In addition, according to some studies, the Makenzie study for instance, point out that pandemics have intensified the challenges that women already face at the workplace – doing double work shifts, being at work, being at home with family responsibilities, and find that 1 in 4 women consider downshifting their careers because of family responsibilities and new COVID environment (interruption in schooling and childcare). These developments, such as lower employment and lower income, can negatively affect access to finance, to the financial system, especially banking system, as employment and income are one of the main criteria assessing the credit worthiness of the borrowers and can further amplify the risks or the challenges for women. Let me mention couple of numbers. For the Western Balkan region, about 60% of all borrowers from commercial banks are men and only 40% are women. And even more, 64% of all outstanding loans are extended to men. I think this number gives a flavor of the kind of challenges women face across the region. The access to finance is an important determinant, not only for the basic needs, but also for female entrepreneurship that lacks in the region in comparison to more advance economies. Overall, all the numbers that were discussed, clearly point that unlike other previous crisis episodes, this one has definitely disproportionately affected women in many respects, additionally accentuating the challenges that women have faced even before the crises.
Mugur Isrescu: 30 years of partnership between the World Bank Group and Romania Speech by Mr Mugur Isrescu, Governor of the National Bank of Romania, at the 30 years of partnership between the World Bank Group and Romania event, Bucharest, 7 November 2022. *** Vice President Bjerde, Directors Vincelette, Akhalkatsi and Karadsheh, Prime Minister of Romania, Vice-Chairman of the Senate, Vice-Chairman of the Chamber of Deputies, Presidential Adviser, Your Excellencies, Ladies and gentlemen, Next month we will celebrate the 50th anniversary of the accession of Romania to the World Bank and the International Monetary Fund (IMF) in 1972. Romania was the first among the countries of the former communist bloc that joined the international financial institutions. Unfortunately, during the 1980s the authorities in Bucharest had weakened the relationship between Romania and these two institutions, almost close to severing all ties. The normalization of the relationship, after the fall of the communist regime, led to a new beginning. The opening of the World Bank's office in October 1991 – the moment we are celebrating today – signifies a milestone that marked the start of a new historical point of reference in Romania's relations with the World Bank and our transition towards a market economy. The 1990s were perhaps the most difficult ones. We had benefited from the direct support of the IMF and the World Bank.

A higher capital adequacy requirement for taking bigger risks will thus lead to the banks being forced to charge more for lending money to higher risk borrowers. This is a regulatory system that is used by 120 countries and it contributes to financial stability around the world. However, the current capital adequacy rules from 1988 are divided into 4 fairly rough risk classes, which do not very well reflect the risk with various borrowers. For instance, the risk classification means that all companies are in the same risk class, despite the fact that they can differ markedly from one another. There has therefore been intensive work on further developing these rules by the Basel Committee, in which both the Riksbank and Finansinspektionen (the Swedish financial supervisory authority) participate. The idea with the new rules is that the risk weighting will better reflect the actual credit risk. This means that the banks will become more thorough in assessing the relationship between the risk in the credit and its yield. An increased risk will therefore be marked in the banks’ pricing of loans, i.e. the interest rate. There are both advantages and disadvantages with the proposed capital adequacy rules. The proposed rules mean that the banks must hold more capital if the risks in their given loans increase. If they do not have more capital than the rules require, they must either acquire more capital or reduce the risks in their lending.
It will depend on the circumstances, but always based on a rigorous and detailed analysis. Another good example of the interactions among the different macroprudential instruments is related to the surcharge on systemic entities (globally systemic or domestically systemic banks), which is the main capital tool to address the cross-sectional dimension of systemic risk. On top of how to calibrate this buffer, we need to study further how it interacts with the countercyclical capital buffer. This is especially important in countries where credit from systemic banks 4  Beyond the LTV Ratio: New Lessons from Spain. J.E. Galán and M. Lamas. Mimeo. 9/11  represents a high proportion of total credit and, in addition, when these banks have a significant international presence. On the one hand, the empirical evidence is quite unanimous in showing how higher levels of capital in the banking system as a whole reduce the probability of systemic crises occurring. Consequently, if systemic entities are the main determinants of how the credit cycle evolves and the buffer applied to them is sufficiently high, it would be reasonable to think that the probability of having a systemic crisis is smaller. Conceivably, then, the degree of activism necessary with the countercyclical capital buffer would be lower than in other jurisdictions in which the systemic banks are less relevant. However, even if the probability of a systemic crisis occurring is lower, this does not guarantee that its intensity diminishes, and this buffer was not designed to be released in these circumstances.

Let me now conclude by stressing that, in this context in which a homogenous framework and experience in the use of macroprudential tools is lacking, having  5  For international attempts to follow a cross-sectoral approach on residential mortgage underwriting see, however, the FSB Principles for Sound Residential Mortgage Underwriting Practices (April 2012), the FSB Thematic Review of Mortgage Underwriting and Origination Practices (March 2011) and the Joint Forum Review of the Differentiated Nature and Scope of Financial Regulation – Chapter 3 on Mortgage Origination – (January 2010). 10/11  adequate communication is crucial. From my point of view, this is a critical element of the whole process. Even before that, macroprudential policy-makers must be very careful to prevent the identification of risks from becoming a selffulfilling prophecy. And when deciding to activate any tool, it is necessary to convince stakeholders with arguments and evidence that, even if there are apparent short-term costs, the medium and long-term benefits are clearly greater. Obviously, this implies an in-depth ex-ante impact assessment analysis including all the different options and a general equilibrium approach, and also an ex-post impact assessment analysis to test the efficiency of the selected tools. And now, let me give the floor to our first keynote speaker, Agustín Carstens, who we all know so well. Dr. Carstens is currently General Manager of the BIS, but in the past he was governor of the Bank of Mexico, vice minister of finance also in Mexico and vice president of the IMF.
International reserves grew to a peak of 36.2 billion kronur at the end of July, up 5.2 billion kronur from the beginning of the year despite the repayment of some of the Treasury’s foreign debt. The Central Bank thought it desirable that the exchange rate of the krona should strengthen somewhat to lessen pressures on the domestic market and dampen inflation pressures. The Bank’s measures undoubtedly contributed to lower inflation than expected. Monetary developments changed course at the beginning of August. Currency outflow commenced anew and bond market yields began to rise. This change was the result of increased purchases of foreign securities by residents, a stop in the relending of foreign loans and an increase in general bank lending. The differential between domestic and foreign money market rates had also narrowed because of interest rate rises in some neighbouring countries. When it had become clear that this was not a temporary situation, the Central Bank responded by raising interest rates by 0.3 percent in mid-November. The interest rate had an immediate impact, the exchange rate of the krona strengthened and the currency outflow stopped. At the end of the year, the exchange rate index was 0.9 percent below the central rate of the fluctuation range after having strengthened on the whole by 1.4 percent in the course of the year. International reserves stood at 27.8 billion kronur at year-end, down 3 billion kronur from a year earlier. Reserves are now about 27 billion kronur.

Using model (7) produces the fitted values for wage growth shown in Chart A1, from which the following narrative emerges. For much of the pre-crisis period, low unemployment and around-target inflation contributed to wage growth of around 4% (quarterly annualised). At the onset of the crisis, unemployment rose while recruitment difficulties and productivity fell, pushing down on wage growth. In the years that followed, above-target inflation supported nominal wage growth despite elevated labour market slack. Wage growth began to fall back around 2013–4, which is “unexplained” by the simple Wage Phillips Curve model, but which likely reflects positive shocks to labour supply, as emphasised by the MPC. Since then, wage growth recovered into the start of 2015, before falling back, despite lower unemployment. Some of this fall back is interpreted by the model as reflecting the fall in inflation itself (green  26  Adding quarter dummies to capture possible seasonal effects leaves the estimates unchanged. BIS central bankers’ speeches  19  bars disappear over 2015). In the most recent quarter, wage growth has fallen despite rising recruitment difficulties and falling unemployment, which appears as a negative residual in the model’s interpretation of the data.