samchain/econo-pairs-v1 huggingface dataset:
Speaking of the past, I cannot help remembering that in the early nineties, when I took over as Governor of the National Bank of Romania, a tremendous effort was needed – not only in Romania, but also in the other former communist countries in Central and Eastern Europe – to go from a monobank-type system to a two-tier system. The effort was even bigger in a country like Romania, where – after some attempts to implement reforms in the sixties and seventies – the economic and financial system had become ever more centralised, more Stalinist-like in the final decade of the communist regime. In hindsight, now that things have settled, these changes may seem like a piece of cake, but please try to imagine how difficult it was to take the reins of an institution that had operated in the context of centralised state planning of the entire economic activity. There was no trace of monetary policy and commercial banking operations needed to be separated from central bank operations. The former were taken over by Banca Comercială Română, later part of the Erste Bank group, while monetary policy became the responsibility of the National Bank of Romania. The “parting of the waters” occurred pretty quickly, but the new NBR only accounted for less than 5 percent of the former central bank employees, most of them in cash management and accounting.

I confess that I then felt the need to go to the vault and feel with my own hands the gold bars – Romania’s last tangible reserve in those days (in December 1990, gold reserves stood at 68.7 tonnes, amounting to approximately USD 850 million) – for a boost of confidence that the rather complex economic situation might be successfully tackled. It is hard to believe that this really happened, especially now, when Romania’s international reserves amount to approximately 38 billion euros. I will now move on to less amusing memories of those times. The avatars of economic transition rendered difficult the mission of Romania’s central bank. Monetary policy, a fundamental task of the National Bank of Romania, was facing numerous difficulties and constraints, as the process of lowering inflation was often undermined by the need to pursue conflicting macroeconomic objectives or avert a full-blown banking system crisis. This was because Romania’s path towards a functional market economy was anything but smooth. Quite on the contrary, the process often shifted between step-ups and slowdowns, that is when it did not stall altogether. A major feature of the domestic economy’s reform was the priority given, at the onset of the process, to ensuring the country’s social and political stability. In this context, the preferred choice was a gradual strategy, with reforms spread over many years, so as not to spark major social tensions.
More relevant to today’s conference, following the FSB’s recent Plenary meeting in Tokyo we announced that in the next few weeks we will issue a consultative paper on resolution planning and, in particular, on resolution strategies. The paper, drawn up by a subcommittee led by Christine Cumming of the New York Federal Reserve Bank, will cover three areas. The first is Recovery Triggers and Stress Scenarios used in recovery planning. Firms need to ensure that triggers are not linked mechanically to metrics that lag behind their true financial condition – a problem with some previous earlyintervention frameworks. Recovery actions must start sufficiently early. But care must be taken to avoid markets overacting to the fact of such actions being taken. That is not easy. Second, the consultative paper will outline a possible framework for national authorities to use when identifying the critical functions and support services of firms that need to be sustained in distressed conditions. What matters here is focusing on those services that are vital to the economy. The third, and most important, area of consultation is about the development of Resolution Strategies and Operational Resolution Plans. This guidance aims to capture the main issues that authorities should address.

In their article “Inflation forecasts and monetary policy”, Ben Bernanke and Michael Woodford discuss the case of the central bank fully relying on market forecasts for its decision-making. They conclude that relying only on the market inflation forecast the central bank cannot perfectly stabilise inflation on the target. In the economist’s technical jargon, it can be shown that the rational expectations equilibrium under such circumstances does not exist. Although such a statement looks suspicious, there is quite a simple intuition behind it. Let’s assume that the central bank can infer the current state of the economy only from the market forecasts. Then, following the market forecasts, the central bank will clearly settle monetary policy in order to achieve its target. Consequently, at the end of the day inflation will in fact be equal to the target. In the world of rational expectations, the market forecasters immediately accommodate this experience and their next forecasts will already be equal to the target. Facing market forecasts equal to the target, the central bank can infer nothing about the economy’s current state, which is of course inconsistent with the initial supposition that the central bank can infer the information about the economy’s current state from the market forecasts. Put differently, once we admit that expectations are formed rationally, market forecasts cannot be used as pure information about the economy’s current state. Understandably, we live in a world of information asymmetry and the rational expectations theory does not hold in its “strong” version.
Second, if enterprises, in their search for the best qualified candidates, go so far as to bid up wages, profits may fall and unemployment edge up. Developments ahead will also depend on how wage-earners react. If the wage share has fallen solely because of a lag in wage formation, both wage shares and unemployment may increase. High income growth and a sharp rise in the number of households laid the basis for a sharp, long-term rise in house prices. It now appears that the housing market is cooling after an almost three-fold rise in prices in real terms in the course of the past 14 years. In some regions, house prices are now approximately unchanged or lower than they were a year ago. House price inflation has been accompanied by strong growth in household debt. Household debt in Norway is now about twice the level of disposable income, making the debt-income ratio higher than ever before. At the same time, saving is declining. This means that in addition to fully financing their housing investments through mortgages, households are also raising loans to finance current consumption. Higher interest rates and falling house prices may lead to slower consumption growth and a gradual increase in saving. Growth outlook and the orientation of fiscal and monetary policy I would like to conclude by commenting on the outlook for growth. Global economic developments are important for economic developments in Norway, and changes in the growth prospects for the world economy may influence our forecasts.

To prevent interbank lending rates from rising too much, a number of central banks have increased their short-term lending to banks. In addition, the Federal Reserve has lowered its key rate by 0.75 percentage point in recent months. A further cut in the key rate in the US is now expected, and the interest rate is also expected to fall in the UK. In the euro area, market participants expect a more stable key rate ahead. But developments are not the same everywhere. The central banks in Sweden, Switzerland, Canada, New Zealand and China have raised their key rates. In Sweden, which has a lower interest rate level than our main trading partners, further interest rate hikes are expected. BIS Review 139/2007  5  The interest rate differential between Norway and other countries can have an impact on the krone exchange rate. In the short term, however, the factors that influence the krone exchange rate vary. High oil prices and krone appreciation appear at times to be related, but there have also been periods when the krone has appreciated while oil prices declined. The krone appreciated when the interest rate differential against other countries was high in 2002, but as interest rates in Norway moved down to the level among our trading partners, the value of the krone fell back. In the past, we have observed that market turbulence has occurred in tandem with a weaker krone.
This is particularly due to the profitability given by wide interest rate margins on the domestic market as well as to the fast-paced increase in lending via traditional banking products. Secondly, the overwhelming majority of banks operating in Romania, including those with foreign capital, are legal entities subject to NBR licensing, regulation and prudential supervision. Similarly to foreign bank branches having their main office in other EU Member States, these banks abide by the Basel II prudential and capital adequacy standards. Thirdly, some regulations issued by the National Bank of Romania have often proved more restrictive than the Basel II standards. More specifically, initial capital requirements for licensing a credit institution in Romania are almost twice as much as the minimum level laid down in EU regulations. Moreover, it is worth mentioning that the NBR representatives are part of the competent EU structures involved in the review and improvement of EU regulations governing the financial system architecture. Last but not least, the minimum reserve requirement ratios are still high at 20% on RONdenominated liabilities with maturities of up to 2 years and 40% on foreign currencydenominated liabilities. In addition to their contribution to curbing credit expansion, reserve requirements also play a prudential role in credit institutions maintaining an adequate liquidity level. Finally, let me point out the measures recently taken by the central bank with a view to ensuring sustainable credit growth in the longer-run. These measures are all the more useful amid the persistent turbulences on global financial markets.

2  BIS Review 144/2010  Finally, Ladies and Gentlemen, given the innovations around mobile banking and its attendant challenges, it is our expectation that this workshop will encourage dialogue between different market players in Zambia and within the region. This Conference provides an opportunity for such dialogue and I am glad that it takes cognizance of a dynamic market environment, paying special attention to innovation that may have significant macroeconomic benefits to all involved. We are therefore keen to draw on the policy debate arising from this Conference to move financial services in Zambia to new frontiers. As Bank of Zambia, we will play a catalytic role and facilitate private sector led developmental initiatives. I thank you. BIS Review 144/2010  3
As we look across the industry, hear the experiences of firms and read the emerging literature, like the recent report by the UK FCA, one can identify factors that are likely to impact, and possibly erode, cultural capital.6 I’ll outline several areas where these dynamics may be at play, including loss of personal interactions, severed networks, uncertainty, and decreased monitoring and oversight. Lack of personal interaction. The first dynamic is lack of personal interaction, which is critical to forming trusting relationships. As trust, a cornerstone of a good culture, is built through frequent interactions and reliable behavior, the lack of personal interaction at the workplace has the potential to weaken trust between colleagues, within teams, and across organizations.7 Trust is a complex human emotion that allows individuals to have faith in colleagues to do the right thing and not cause harm.8 Is it possible to sustain this ‘trust’ in colleagues as frequency of interactions decrease and the format of interactions make personal bonding more challenging?

Who better to speak to us this evening on this topic than Otmar, with his extraordinary talent for communicating with an interested general public? Ladies and gentlemen, please join me in welcoming Otmar Issing with a big round of applause. Page 4/4
Clearing in its simplest and original form simply refers to mechanisms for adding up each member’s claims and liabilities to the other members before settlement so only the net amount is paid or owed. The earliest clearing houses were places where banks literally put the receipts recording their respective claims and liabilities on the table at the end of the day so they could be netted off against each other. Such clearing mechanisms still operate in some payment systems though the most important payment systems that settle the highest value payments nowadays operated by central banks work on a gross basis in real time to reduce risk. (Real-time gross settlement of high value payments allows immediate, final and irrevocable settlement of obligations across central bank accounts.) However, we still talk of payments in a currency ultimately ‘clearing’ across the books of the central bank of that currency, for example as in ‘dollar clearing’ across the books of the New York Fed. Central clearing, however, does not mean the clearing inherent in payment systems but the infrastructure that allows financial market participants to manage the risks they face from their counterparties in financial contracts that can last for months or even decades.

This makes me more confident that job growth in January was temporarily depressed by unusually bad winter weather. Other labor market indicators, such as initial claims for unemployment insurance benefits and the employment components of both manufacturing and nonmanufacturing business surveys have also shown improvement recently. Although there is still uncertainty over the timing and speed of the labor market recovery, I do expect that job growth will increase considerably more rapidly in the coming months. We should welcome this. A substantial pickup is sorely needed. Even if we were to generate growth of 300,000 jobs per month, we would still likely have considerable slack in the labor market at the end of 2012. So, why is the economy finally showing more signs of life? In my view, the improvement reflects three developments. First, household and financial institution balance sheets continue to improve. On the household side, the 2008–09 rise in the saving rate appears to have stabilized in the 5 percent to 6 percent range. Meanwhile, the amount of money they need to service their debt (for mortgages, cars, credit cards, etc.) has fallen sharply to levels that prevailed during the mid-1990s. Debt service has been pushed lower by a combination of debt repayment, refinancing at lower interest rates and debt write-offs. Financial institutions have strengthened their balance sheets by retaining earnings and by issuing equity. As a result, some measures of bank credit are beginning to expand again. Second, monetary policy and fiscal policy have provided support to the recovery.
This may seem paradoxical but if people feel they can rely on the central bank, in an economic slowdown it may be possible to ease the monetary stance without triggering higher inflation expectations and bond rates, because everyone counts on policy being tightened before inflation moves up. We have experienced something of this sort in Sweden in the past year. In a system with poor credibility, a monetary easing may be perceived as a sign of a lasting upward shift in inflation. This in turn may generate self-fulfilling expectations, with future problems when efforts are made to control inflation once more. It is understandable that the risk of this is seen as particularly great in economies where inflation has been high for a long time. A more independent central bank is thus in a better position not only to maintain low inflation but also to operate at times with a policy that includes an element of stabilisation (though the problems of fine tuning stabilisation policy should not be underestimated). The German central bank is one example; over a series of decades, economic slowdowns could be parried by lowering the short interest rate fairly rapidly and markedly. It may be in place to point out that credibility and, for that matter, independence can be achieved in various ways. Some countries have recently clarified their regulations so as to BIS Review 32/1997  -7-  bring them into line with the arrangement I have just advocated. One example is New Zealand.

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Working together, the UK authorities’ challenge was to remind financial markets that its sole purpose was as a temporary, short term cash management tool to smooth cashflows, and not in any way intended as a more lasting replacement for gilt issuance as the Government’s primary financing source: something that could 11  All speeches are available online at www.bankofengland.co.uk/news/speeches  11  complicate the execution of monetary policy. Those principles were embodied in a public announcement released on 9 April. In the event, the rapid normalisation of market conditions allowed the Government to announce, and so far meet, sharply higher near-term gilt issuance plans (Chart 14) without any need for recourse to the Ways & Means account. The account remains available for use, if unexpected future cash needs cannot be met by any other market-based means, e.g. because of a renewed period of dysfunction. But in such circumstances, the usage would be short term; and, as soon as possible before the end of the year, the DMO would scale up its market operations to repay the W&M balance. Chart 13: Usage of the Ways & Means account £ bn 25  Chart 14: DMO funding plans compared 2009 2016-2019 average 2020 2020 (DMO announced)  £ bn 350  20  300 250  15  200 10  150 100  5  50  0 2006  2008  2010  2012  2014  2016  2018  2020  Source: Bank of England.

Caleb M Fundanga: Innovative financial products on the Zambian market in relation to credit interest rates and the private sector development Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Zambia International Trade Fair Symposium on “Innovative financial products on the Zambian market in relation to credit interest rates and the private sector development”, Ndola, 30 June 2011. * 1.0  *  *  Introduction  Financial development contributes to economic growth in a very significant way and it has been demonstrated that countries with more developed financial systems tend to grow faster. Therefore, the financial sector is key to economic development and policies aimed at developing the sector would be expected to contribute to economic growth. 2.0  The current financial sector policy environment in Zambia  During the 1970s and 1980s Zambia pursued a policy of fixing interest rates for long periods and at relatively low levels, with the ostensible purpose of promoting growth. However, these administrative actions introduced economic distortions into the financial structure of the economy including the following:   The hindrance to economic growth arising from the inefficiency in the allocation of resources (with credit controls and distorted price indicators). These controls resulted in both low levels of domestically generated savings and investment, thereby reducing the economy’s growth rates.   The financial system remained generally under-developed with inefficient lending patterns that failed to achieve their distributional goals.
The main entry on the liability side of the balance sheet is “central bank money”, comprising banknotes, which are supplied on demand, and the reserve accounts of commercial banks and building societies. 2 These are effectively sterling current accounts for the commercial banks – they are among the safest assets a bank can hold and are the ultimate means of payment between banks. In normal circumstances, the main entry on the asset side of the balance sheet is the Bank’s lending to those same commercial banks. 3 In setting monetary policy, our normal objective would be to lend exactly the amount of central bank money demanded, consistent with the MPC’s choice of Bank Rate. Crucially, although the targets for reserves accounts may react to the state of financial stability in the system, the Bank’s choices here are dictated by the stance of monetary policy. In normal times, we ask the banks to choose their own targets for reserve accounts and then lend just enough cash to the system as a whole so that the banks can collectively meet the aggregate of their targets. The commercial banks will then lend to, or borrow from each other in the inter-bank market, to distribute the total amount of cash around the system so that each individual institution can meet its target. Each bank is incentivised to meet its reserves target by the application of penalty rates to those who are – on average over a monthly maintenance period – either excessively short or long.

We can do this either by repo of bonds held on the Bank’s balance sheet or by offering to supply one-week Bank of England bills at Bank Rate. 8 Longer-term repos have a monetary objective in part. It is not necessarily efficient to lend very large amounts of cash every week in short-term repos. It would imply that the market was consistently short of cash in large size on a week-by-week basis, perhaps putting unnecessary strain on the inter-bank lending market and on the Bank’s operations. That strain could, perhaps, cause unwanted volatility in overnight rates. By lending a proportion of the cash for longer term – three months or more – the Bank can ensure that the size of shortterm repo operations are set at an appropriate level. Using longer-term repos to meet financial stability objectives has grown in importance during the financial market crisis. They can provide liquidity support in at least three dimensions: maturity, size and collateral type. The inter-bank market has been quite disrupted at times during the past three years. Counterparty credit concerns have limited unsecured lending, and liquidity was sometimes hoarded. A range of asset managers increased their holdings of cash at increasingly short maturity – ultimately in overnight accounts – concentrated in what they assessed to be the safest banks.