samchain/econo-pairs-v1 huggingface dataset:
Today I will focus on the independence conferred on the European Central Bank, on the reasons for it, and on the extent to which this independence can apply to the different ECB tasks and responsibilities. The main point I will make is that, notwithstanding the changes in the ECB’s role in the aftermath of the financial crisis, its independence remains unchanged and continues to protect its core monetary policy  http://www.ecb.europa.eu/press/key/date/2017/html/sp170330.en.html[03.04.2017 15:53:14]  Central bank independence revisited  function. I will refer to the relevant case law of the Court of Justice of the European Union (CJEU), which has adjudicated on some controversial issues related to the ECB’s mandate and the scope of its independence. Independence being an exception in a democracy, it has to be seen narrowly and cannot be applied to an ever-widening area of responsibilities without due adjustments in accountability for the new tasks. Central bank independence From an economic perspective, the support for central bank independence rests, in general, on three time-honoured insights. The core of these insights has remained intact when compared with the pre-crisis consensus, but I will touch upon some challenges as I go along. First, there is sound economic evidence supporting the argument that an environment characterised by price stability is conducive to economic growth and high levels of employment which, in turn, positively contribute to the welfare of citizens. This insight can be explained by reference to a broad range of complementary factors which make inflation “costly”. I would mention four such factors in this respect.

Apart from the fact that it was difficult to value the instruments themselves, the complex links between the banks and their special companies made it difficult to see the actual exposures of the banks. Eventually, no one knew where the risks  BIS Review 135/2009  3  were. The increasing amount of loans not only made investors highly indebted in relation to their equity, many banks also did not really have enough capital in relation to the risks they took. When economic activity began to decline in the USA and prices fell on the US housing market, many institutions suffered major losses. Uncertainty about who might be exposed to impaired assets led to trade petering out on a number of financial markets. Many banks now found it difficult to find funding on these markets. In September 2008, the major US investment bank Lehman Brothers filed for bankruptcy protection. This had extensive repercussions throughout the world. The global financial crisis escalated and the Swedish banks were also seriously drawn into the crisis. All over the world, banks and other financial institutions began to cut back their exposures and reduce their level of indebtedness. The decline in lending reinforced the downturn in global economic activity. This in turn accelerated the decline – many assets fell dramatically in value and the banks' loan losses increased. A vicious circle arose in the global economy in which the financial turmoil aggravated the weakening of the real economy and vice versa.
49  As part of its project to disseminate information about the central bank to various target groups, the Reserve Bank of India has made several comic strips for the benefit of school children. See http://www.rbi.org.in/financialeducation/Home.aspx. 50  See article “Bergen fikk Bislett Games 2004 (The 2004 Bislett Games goes to Bergen)”, NTB, 6 October 2003. 51  A more detailed explanation was probably available but was not included in the media coverage. 52  My predecessor, Jarle Bergo, delivered a speech a few years ago where he presented a mathematical equation that illustrated the assessments underlying our interest rate setting (see “Interest Rate Projections in Theory and Practice”, speech at Sanderstølen, 27 January 2007). I remember that we were uncertain about the reactions to this. My Swedish colleague Lars Svensson had recommended that such a target function be published in the interest of transparency, but no central bank had ever done this before. There was no firstpage news of the type “this equation determines the interest rate”. Our “bold step” proved to be fairly undramatic. It would seem that this is really the rule rather than the exception every time we have moved towards greater transparency. Bergo’s lecture was included in the curriculum of economics Professor Michael Woodford of Columbia University in New York. 53  Norges Bank Watch 2008 writes: “Norges Bank should facilitate a more open discussion regarding the empirical performance of their (mechanical) forecasting models by communicating the role played by the “judgment component” more clearly.

In the area of clearing we need to monitor the impact of mandatory clearing not only on central counterparties, in terms of capacity and risk management, but the focus should also be on whether an increase in indirect clearing changes the risk profile of the direct clearing members. 6  BIS central bankers’ speeches  The reform will also have an impact on collateral needs, and we will hear more on this in tomorrow’s academic session on the topic. However, authorities should monitor the availability of high quality collateral and related collateral management services. New risks that appear as a result of innovation, such as those relating to collateral transformation, need to be analysed and addressed. We should not wait for the next crisis to happen but need to be constantly vigilant. Though substantial progress has been made, it is also true that only just over half of the FSB jurisdictions have implemented the reform agenda so far. Although these include the jurisdictions of the most important OTC derivatives markets, we need to be vigilant in order to avoid regulatory arbitrage – that is to say, business moving from jurisdictions that stick to the agreed agenda to others that lag behind. Little over two weeks ago, the BIS published its macroeconomic impact assessment of OTC derivatives regulatory reforms. The results are promising.
The SNB is now expecting inflation of 0% in the current year and 0.4% in 2015. In 2016, inflation should increase to 1.0%. Furthermore, the value of the Swiss franc is still high. With the three-month Libor close to zero, the minimum exchange rate continues to be the right tool to avoid an undesirable tightening of monetary conditions in the event of renewed upward pressure on the Swiss franc. Through the minimum exchange rate, therefore, we are in a position to fulfil our price stability mandate. However, the consistent enforcement of the minimum exchange rate has contributed to the substantial increase in our currency reserves. Slide 1 shows that, since 2009, our currency reserves have increased by a factor of about six, and the foreign  BIS central bankers’ speeches  1  exchange reserves are almost ten times higher. Our foreign exchange reserves, that is, currency reserves excluding gold, currently amount to almost CHF 450 billion, which is over 70% of Switzerland’s annual economic output. The expansion of our foreign exchange reserves means that our balance sheet is more exposed to the volatility of the financial markets than it used to be. Even slight price changes can have a strong influence on our investment performance. This has made our investment policy even more challenging. However, thanks to established processes and a high level of expertise, we are in a position to meet these demands.

Operational systems and controls, including mechanism to protect consumers’ interest and prevent criminal activity, can vary considerably between entities and jurisdictions. With typically hundreds or more money services entities in most countries, such diversity presents a unique set of challenges for money services businesses and regulators seeking to put in place the necessary frameworks to manage and mitigate risks associated with the business. In the more recent period, money services businesses have been confronted with increased challenges from heightened global concerns with crimes committed cross-border and  BIS central bankers’ speeches  1  transnational money laundering. The cash-based nature of MSB transactions, global reach of remittance networks, and customer verification processes, if not properly managed would render MSBs susceptible to money laundering threats. Heightened regulatory scrutiny over money laundering controls and heavy penalties meted out by regulators might prompt banks to review their relationships with MSB companies. Some banks have withdrawn banking facilities provided to MSB companies, creating significant difficulties for large numbers of MSB companies that are doing legitimate business. On the other hand, as the bar is raised for MSBs to strengthen AML procedures, there is a concern over the unintended consequences that this might exclude certain segments of society from access to the formal financial system. Worse, it pushes more transactions to the informal or illegal channels. I raise these observations to highlight two points which I thought are relevant to this Conference.
It is necessary to continue strengthening the robustness of these methods to evaluate situations of extreme tension. Starting tomorrow, the Central Bank of Chile will hold its Annual Conference, and this version will feature frontier work in this area. From the regulatory standpoint, supervision must consider the macroeconomic impact of financial activity. In the months to come, we will have to analyze also the potential procyclicality of the Basel II capital requirements, as well as the modeling and quantification of liquidity risk. A regulatory framework will be necessary to ensure the building of sufficient reserves in the boom phase of the cycle in order for the financial system to be well capitalized when the bust phase comes. 9 One of the most recurring sources of financial stress in the past few years in emerging economies are periods of euphoria or pessimism, which trigger movements in their exchange rates beyond what their fundamentals would justify. For example, when economic expectations are good, foreign exchange appreciations can arise with symptoms of bubbles in favor of all the domestic assets. As I discussed before, a first line of defense for specific asset prices, stocks or housing is to raise the interest rate. However, in the area of exchange rates this may trigger more pressures to appreciate and exacerbate financial imbalances.

Responsible investment is an integral part of the investment strategy and includes the exclusion of companies on an ethical basis. In 2016, the Ministry of Finance, at the request of the Storting, introduced two new criteria for ethics-based exclusions: a climate criterion and a coal criterion. Norges Bank has conducted extensive research to collect data and perform analyses to identify the companies that fall under the coal criterion. Based on the results, the Executive Board decided to exclude 69 companies and place 13 companies under observation in 2016. On the advice of the Council on Ethics, the Board also decided to exclude a further eight companies and place one company under observation, while the exclusion of one company was revoked. The exchange of information and division of responsibilities between Norges Bank and the Council on 1/2  BIS central bankers' speeches  Ethics functions smoothly. At the end of 2016, Norges Bank submitted a recommendation to the Ministry of Finance to increase the share of equities in the GPFG. Historically, equities have generated a higher return than bonds, but the return has also been more volatile. A lower return on bonds is the price we pay to dampen fluctuations in the fund’s value. In recent years, bonds have become a more efficient, but also more costly, hedge against security market volatility. Both factors suggest that the bond allocation should be somewhat lower. In addition, Norway’s petroleum wealth as a whole has become more diversified over the past ten years.
14  Within that, this rise in mark-ups among foreign relative to domestic sales-focussed firms is largest in the manufacturing and ICT sectors. Taken together, this evidence is consistent with a story of rising mark-ups being concentrated among internationally-operating firms, who perhaps benefit disproportionately from global network economies of scale and scope. These firms tend to occupy the fat and fattening upper tail of the mark-up distribution. These are firms that might legitimately be termed “superstars” (Autor et al (2017)). Given this diagnosis, what impact might the rise in mark-ups have had on the macro-economy? One aspect is what impact increased market power may have had on firms’ incentives to invest and innovate and hence on firms’ productivity. With investment and productivity each having under-performed over recent years, the relationship with market power has been subject to increased academic scrutiny recently (for example, Eggertsson, Robbins and Wold (2018)). The relationship between mark-ups and productivity is vital in understanding their macro-economic effects (Van Reenen (2018)). On the one hand, if highly productive ‘superstar’ firms, benefitting from network economies of scale and scope, have become more dominant, then higher mark-ups could be the side-effect of a positive supply shock in the economy. On the other hand, if mark-ups are the counterpart to increased market power and reduced competitive pressures, that would suggest a negative supply shock. These effects are not mutually exclusive. For example, Aghion et al (2005) develop a model which generates a concave relationship between competition and investment.

The priority was to create a secure arrangement that will provide both exporters and importers with a simplified way to settle their transactions with a degree of ease similar to that with which they effect payments within their own countries. From this point forward, there is no doubt that the private sector will take it upon itself to create new financial products and further deepen the real-peso market. Indeed, deepening of the real-peso market, reduction of trade obstacles and access on the part of small and medium exporters are the primary objectives of this initiative. Despite noncompulsory, the facilities and lower costs of the SML should attract exporters and importers. There will be no foreign exchange contracts, despite documentation currently required will remain mandatory. The essential alteration for Brazilian exporters will be the need to register the operation in real. With elimination of a third currency in direct transactions among companies, exporters will set their prices in the currency of their own countries. Thus, they will be better able to calculate their margins precisely, since they will no longer be exposed to exchange rate risk. At the start, it will be possible to carry out trade operations between the two countries with terms of up to 360 days. Payments of services related to trade (for example, freight and insurance) can also be made in own currencies.
According to the Bank’s regional network, reduced use of overtime hours, partial lay-offs and reduced working hours among part-timers have resulted in lower average working hours. Moreover, increased sickness absence has made a contribution. Output growth is expected to increase gradually through 2010, while growth in the number of hours worked shows a relatively small increase. As a result, employment will gradually become more consistent with the level of output, and productivity will rise further through 2010. Compared with previous downturns, productivity growth remains weak. Owing to a fall in labour force participation, labour force figures were lower at the end of 2009 than at the beginning of the year in spite of underlying growth in the working-age population. Some people exit the labour force or choose not to enter the labour force when labour demand falls. Unemployment continued to rise in the latter half of 2009, but at a far slower pace than earlier in the downturn. Registered unemployment is projected to remain at about today’s level to the end of the year. The Technical Reporting Committee on Income  BIS Review 38/2010  3  Settlements estimates annual wage growth at 4.1 per cent in 2009. We expect wage growth to show a further decline in 2010. The uncertainty facing exposed industries is still considerable and wage growth among trading partners is low. A reserve of foreign labour and persons who have temporarily exited the labour force, and who may rapidly return, is probably pulling down wage growth.

The fund’s global equity holdings doubled in the same period. Petroleum investment has increased substantially in recent years. Investment increased between 2008 and 2009 in spite of postponements and cancellations of a number of projects after the financial crisis unfolded in autumn 2008. This reflects that investment projects in 2009 were to a large extent determined by contracts that were concluded prior to the financial crisis. Petroleum investment still showed a substantial decline through 2009. The volume of petroleum investment is expected to drop further this year and next, followed by a pick-up in 2012 and 2013. The investment decline this year and next reflects postponements of projects and the near completion of large investment projects. Exports have picked up after world trade showed a faster and somewhat stronger increase than expected. Export companies in our regional network report that new orders have increased and that production is expected to rise over the next six months. A further increase in world trade will contribute to underpinning growth in exports. Measured by relative labour costs, Norwegian labour has never been as costly as it is now. As a result, the Norwegian export industry may lose market shares ahead. There are no prospects of another rise in export prices as sharp as in the 2000s, when Norway’s terms of trade improved considerably. Norges Bank raised the key policy rate on two occasions by a total of 0.50 percentage point in the fourth quarter of 2009. The feed-through to bank lending rates has so far been somewhat smaller.
The safety net is not there to protect every individual institution that gets into trouble as a result of its own failings. Even where it is judged that there is a systemic threat - and a public interest in containing it - a judgement that will properly need to be openly justified at the appropriate time - last resort assistance like IMF assistance to its member countries - has to come with conditions. The purpose of last resort assistance is not to protect either the shareholders or the management of an illiquid, even less an insolvent institution, and the appropriate outcome may well be an orderly run-down or sale of the business. That may sound severe - even threatening to commercial bankers. But it is necessary both to ensure that moral hazard does not undermine the safety and soundness of the banking system and to maintain its competitive efficiency. Pulling all this together the “authorities” - governments, financial supervisors and regulators, and central banks - have a vital role in creating and sustaining a safer, sounder, banking system. But in the end it depends critically on you - the professional, commercial, bankers. Yours is a tough job at the best of times. It is especially challenging in today’s environment of rapid financial change as a result in particular of the inter-action between deregulation and increasing competition, globalisation and the revolution in information technology, which are constantly bringing new dimensions to your unenviable task of risk management.

This means that the central bank has to take stronger action for monetary policy to have a stimulating effect. Some important questions are raised here: What are the fall in real interest rates and the downturn in inflation due to? Are these temporary or permanent changes? Are the central banks over interpreting their price stability task or have they not done sufficient to cure the low inflation? Some say that all things bad are mostly the fault of the central banks. I believe that part of the intensive debate on monetary policy conducted both here in Sweden and abroad is due to us economists tending to have different answers to these questions. These answers in turn affect the opinions on what is the best policy in both the long and the short term. How has Swedish monetary policy been conducted in recent years? Swedish monetary policy strategy entails stabilising inflation around the target and striving to stabilise production and employment around paths that are sustainable in the long term. If we look back two years, to the period before the April 2014 meeting, CPIF inflation had been around 1 per cent for some time, which is too low given that the Riksbank wishes to uphold confidence in the inflation target of 2 per cent as an anchor for price-setting and wage-formation. Another observation from April 2014 was that the more long-run inflation expectations had fallen below the 2 per cent level.
A specific target for monetary policy was thus a necessary supplement to the fiscal rule to ensure reasonable macroeconomic stability. The operational target states that monetary policy in Norway is oriented towards low and stable inflation, with annual consumer price inflation of approximately 2.5 per cent over time. In its conduct of monetary policy, Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment. 2  BIS Review 106/2006  Current economic situation Since the summer of 2003, there has been a clear upturn in the Norwegian economy. Low domestic interest rates, increased petroleum investment, favourable prices in important export markets, and a strong upturn in the world economy have contributed to solid growth in the Norwegian economy. So far in the upturn, the mainland economy has grown by an average of close to 4 per cent annually. Current information on economic developments indicates that the upswing is continuing. Corporate sector profitability is good. There is strong growth in employment, unemployment has fallen markedly, and household demand continues to rise. Unemployment is now at a historically low level. Seasonally adjusted, registered unemployment stood at 2.3 per cent of the labour force in October. Nevertheless, wage moderation has generally prevailed so far. The opportunities provided by an international labour market may have prompted participants in local and centralised wage negotiations to place greater emphasis on the considerably higher wage level in Norway relative to our trading partners, and potential job vulnerability.

Speech by Mr William A Ryback, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Macro Prudential Supervision Conference: Challenges for Financial Supervisors, organised by the Korea Financial Supervisory Commission / Financial Supervisory Service and the International Monetary Fund, Seoul, 7 November 2006. *  *  *  Ladies and Gentlemen, I am pleased to be here today to add my thoughts to this important discussion on emerging insights into the macro prudential end of the supervision business. I also am pleased to be back in Seoul one of the most dynamic cities in Asia and to be hosted by my friends in the Korean Bank supervisory community - many of whom I have known for a number of years. It is almost ten years from the financial crises that affected many parts of Asia. This conference then is being held at an opportune time to allow us to reflect on the lessons learned. There has been considerable change over the last decade. Risk management in the regions banking systems’ have become more robust. There has also been a step-change in the standards of supervision. Risk-based supervision has replaced compliance checking. There are also now moves under way to improve regional cooperation on issues like Basel II implementation, in which EMEAP will continue to play a leading role. Clearly, no financial system can be considered stable unless the individual institutions that comprise its whole are themselves healthy.