samchain/econo-pairs-v1 huggingface dataset:
François Villeroy de Galhau: With economic recovery underway in Europe, what monetary policy? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at a lunch-debate at the Centre des Professions Financières, Paris, 28 September 2017. * * * Accompanying slides  Ladies and gentlemen1, It is a pleasure to be here with you for this lunch-debate of the Centre des Professions Financières. I would especially like to thank your chairman Michel Pébereau for his kind invitation. Today, I am delighted to be able to speak to you on a highly topical subject: monetary policy in Europe in the context of economic recovery. The prospect of a very gradual normalisation of our monetary policy gives rise to concerns and expectations. I will begin by focusing on what our accommodative monetary policy has already achieved today, before talking about prospects for the future. I. What is the situation today? Economic recovery in the euro area is here [slide]. It is robust and broadly based across  countries and sectors. Our latest ECB forecasts2 confirm this: growth should stand at 2.2% in the euro area in 2017, i.e. a significant upward revision of 0.3 point compared with June’s forecast of 1.9%. This means that for the second consecutive year, euro area growth will be comparable to that of the United States.

Durmuş Yilmaz: Dollarization – consequences and policy options Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at a Conference on “Dollarization”, Istanbul, 14 December 2006. *  *  *  Distinguished Governors, Academicians and Guests, I would like to welcome you all to the conference entitled “Dollarization: Consequences and Policy Options”. I would also like to thank you for sharing your precious knowledge and experiences with us. As this conference is one of the activities organized in the context of the 75th anniversary of the Central Bank of Turkey, it gives me an honor to give the start for it. Before continuing with my speech, I would like to comment on the motives that lie behind the topic of this conference. Although we have never had hyperinflation, we, in Turkey, experienced high and chronic inflation for the past almost 30 years before 2001. Living long years with chronic inflation led to huge losses in the credibility of our national currency, which is important for us as an institution responsible for issuing banknotes and maintaining stability of the money. In this sense, it will be appropriate indeed to discuss dollarization in depth, I believe. Given the wide range of issues related to dollarization and the limited time available, I will make some brief remarks on the concept of dollarization in general and touch upon the Turkish experience in particular. Dear Guests, Dollarization has evolved as one of the noteworthy features of globalization during the last two decades.
There is a risk, therefore, that the fall in the US current deficit will not be matched by a fall of surpluses in high surplus countries but a rise in deficits in other deficit countries. The imbalances could be transferred not reduced. So it is important that the current large gap between savings and investment in the Far East and oil exporting countries narrows. In the near term, the ability to increase spending will be constrained by the recent increase in inflationary pressures in these countries. But more exchange rate flexibility should be helpful on both fronts. And over the medium-term, in oil exporting countries, government spending is likely to increase further in response to past increases in incomes since part of the rise in the oil price looks to be permanent. This gives oil exporters the opportunity to spend more on diversifying production in their economies. It is encouraging also that in China the government has plans to increase its own expenditure on the infrastructure, encourage higher spending by households through speeding up financial sector reform and improving the safety net as well as allowing more flexibility than in the past in the exchange rate. Conclusion Given the growth of the foreign currency reserves in many EMEs, the emergence of SWFs making long term investments on financial criteria in a wider range of instruments is a positive development.

The rapid upturn in inflation last autumn was largely due to rising energy and food prices, a reflection of the fact that prices rose rapidly on the world market. At the monetary policy meeting I pointed out that it is not possible to immediately counteract such rapid price impulses from abroad with monetary policy. Quite simply, it must be allowed to take some time. In the Monetary Policy Report the rapid price increases are to some extent assessed to be of a temporary nature. If world market prices do not continue to rise at the same rapid pace in future, inflation will fall back again. This is also what is forecast in the main scenario of the Report. However, to some extent, it also concerns the effects on inflation which risk becoming more permanent and which may need to be counteracted with monetary policy. When inflation rises and is above the target, as CPI inflation now is, it is important that it is not allowed to become entrenched and become permanently high. The risk of this increases if inflation expectations rise, and that is exactly what has occurred. Inflation expectations have risen not just one year ahead, but even two and five years ahead, which is troublesome. The monetary policy decision The upturn in inflation and in inflation expectations in the slightly longer term were also factors that indicated the interest rate should be raised at the monetary policy meeting in February.
Over twenty-five years we have moved from monetary targets to an inflation target and from a medium term financial strategy to rules for fiscal policy over the cycle. Yet the essential objective of maintaining monetary and fiscal discipline remains the same. All major political parties in the UK now agree that stability is the key to economic success. We do not know whether the Great Stability will continue, as it has for more than a decade now. In part, it will depend upon whether our framework of inflation targeting can respond to the economic shocks that will undoubtedly be visited upon us in the years ahead. And that is the subject of my lecture. In only fifteen years inflation targeting has taken the central banking world by storm. Table 1 shows that there are now 22 countries in which monetary policy is based on an inflation targeting regime. So tonight I want to discuss what inflation targeting really means, why it has been successful in Britain and elsewhere, and what challenges it faces in the years ahead. The lecture tries to answer three questions. First, what can monetary policy do and how has our understanding of that changed over time? Second, what are the challenges for central banks that result from incomplete knowledge of the transmission mechanism of monetary policy? Third, is inflation targeting the answer to those challenges? I believe that it is. Inflation targeting, I shall argue,  1 2  This proposition is documented in detail by Batini and Nelson (2005).

We can discourage the second by being open and transparent about the reasons for movements in inflation and decisions on monetary policy. If we have no hidden message, then eventually people will stop looking for it. Rational optimising behaviour is in many situations too demanding, and actual decisions may reflect the use of heuristics. That must be taken on board in the choice of monetary policy strategy. In turn the strategy may affect the heuristic chosen by economic agents. And a good strategy will not only help agents choose a heuristic but will be robust with respect to that choice. Does inflation targeting meet those criteria? Inflation targeting as a framework which accommodates learning So far I have emphasised three key points about monetary policy. First, expectations play a fundamental role in the way monetary policy works. As the Maradona theory of interest rates shows, expectations of future monetary policy actions are at least as important as the level at which the official interest rate is set today. Second, our knowledge of the economy is continuously evolving – as the history of the Mais lecture has itself demonstrated. There simply is no unchanging rule, however complex, that can adequately describe the optimal monetary policy strategy. Third, the complexity of optimising behaviour means that central banks need to allow for the possibility that people use simple rules of thumb. Taken together, these arguments provide a powerful case for inflation targeting.
Hence the need to sever this link by transferring responsibility for the stability of the banking system to the European level. How to re-integrate the banking system: the rationale for a banking union To have one banking system again, several measures need to be jointly implemented. First of all, each government must deliver fiscal consolidation – this is the objective of the Fiscal Compact that was agreed on last December. Once all sovereigns have fiscal balances that are sustainable in the long run, sovereign spreads should narrow again – but this will take time. In the meantime, we are facing a long transition. Second, we need to strengthen the banking system to the point where its creditworthiness is less dependent on that of sovereigns. Euro area banks have to improve their resilience, both in terms of capital and of liquidity. This objective has been fostered by the European Banking  1  See Eichengreen, B and C. Wyplosz, 1998, “Stability Pact? More than a minor nuisance?”, Economic Policy, 67–113. BIS central bankers’ speeches  3  Agency (EBA), notably in its final report on the recapitalisation of European banks which was published last week. It has revealed a significant reduction in banks’ capital gap. In this respect I would like to stress the importance of the EBA’s recommendation that banks keep high absolute levels of core Tier 1 capital, corresponding to the current 9% ratio, in the transition to the Basel III standards.

In response, the ECB has announced the Outright Monetary Transactions (OMTs) – interventions on sovereign bond markets to repair the transmission channel when the level of spreads hampers monetary policy transmission and reflects market’s perception that the single currency might break up. OMTs would be implemented to the extent that they are warranted from a monetary policy perspective for countries under an EFSF/ESM macroeconomic adjustment or precautionary programme, as long as programme conditionality is fully respected. IMF involvement will also be sought. OMTs would not be carried out while a given programme is under review, but they would resume after the review period once programme compliance has been assured. The announcement of the OMTs has reduced concerns about the materialisation of destructive scenarios. But it is essential that governments continue to implement the necessary steps to reduce both fiscal and structural imbalances and proceed with financial sector restructuring measures. The structural reason that the transmission channel is malfunctioning is the tight link between sovereign and bank funding conditions. The risk that banks’ balance sheets would be contaminated by sovereign risk was highlighted at an early stage by Barry Eichengreen and Charles Wyplosz (1998). 1 If banks are to transmit monetary policy impulses evenly, they need broadly similar funding conditions. However, if the ultimate responsibility for the stability of the banking system falls within the domains of individual sovereigns, clearly the two are linked and when one of the two becomes riskier, this risk is transmitted to the other.
We should also remember that the qualifying criteria for the AMA focus not just on the quantitative requirements for measuring operational risk, but also on qualitative standards that demonstrate banks have instituted a robust control structure. Institution-wide capital allocations A second theme from the consultations addressed the question of whether the AMA should allocate operational risk capital on a consolidated, institution-wide basis or rather on a legal entity basis. Most banks, and especially large and internationally active institutions, understandably would prefer to calculate the relevant capital requirements on a firm-wide basis. Banks shared a variety of views on why a firm-wide allocation model would be preferable. Some respondents highlighted the technical and logistical constraints on developing an AMA, indicating that it is more difficult, from a modelling perspective, to estimate the potential for operational losses at even a medium-sized entity because of the need for a large body of data. Others, including the RMA working group, noted the practical challenges that would arise if they were required to develop a separate model for each legal entity and seek approval from supervisors in each jurisdiction in which they operate. But an economic view of risk suggested a different and more fundamental concern. Many banks would like full recognition of the economic benefits they gain from operating across a diversified mix of business lines and entities.

The development of IFRS 17 itself saw the issuance of IFRS 4 as an interim standard, one discussion paper and two exposure drafts. Its finalisation was achieved after more than 900 meetings, 600 comment letters and 4 rounds of fieldwork and testing! I am told it is among the longest in duration, largest in scale and most complex project ever undertaken by an international standard setter – making it a tremendous feat and a testament to the intellectual capacity and perseverance exemplified by the IASB. 1/5  BIS central bankers' speeches  Even then, this 17 year journey remains incomplete as the final stretch begins with the passing of the baton from the standard setter to those involved in preparations for implementation – that is the industry. As the clock counts down to the global implementation date in January 2021, the most important implications of IFRS 17 lie ahead of us. 1. First, it will have an important impact in strengthening market discipline. 2. Second, it will improve alignment between business units and financial management and reporting. This in turn will provide more robust foundations for the growth and development of the insurance sector in this region. 3. And third, it will raise important issues around governance to ensure the integrity of financial reporting by insurers and other market participants.
There is a negative correlation, suggesting it might be difficult for the sectors which absorbed most workers pre-Covid to repeat this feat post-Covid. 15  All speeches are available online at www.bankofengland.co.uk/speeches  15  Chart 14: Falls in output by sector against post-GFC employment growth Covid-19 sectoral output hits, % 40 20  Contribution to post-GFC employment growth, pp  0 -20 -40 -60 Accommodation & food  -80 -100 -1  0  1  2  3  Sources: ONS and Bank calculations. Notes: Sectoral output hits on y-axis are from Chart 2. Numbers on x-axis are the percentage point contribution of each sector to total growth in UK employment from its post-global financial crisis trough to end-2019. Other, structural, factors may further complicate the labour market picture. The Covid crisis has shifted relative prices in ways which could encourage companies to invest in machines rather than people during the recovery. The price of capital goods has fallen while the price of labour has increased because of the need for Covid-secure premises and practices. This shift in the relative price of capital versus labour will provide a headwind to the re-absorption of workers. A second structural headwind concerns the skills mix of those losing their jobs. Research suggests this is likely to be skewed towards those with fewest skills and least experience, especially the young. The Resolution Foundation estimates that high unemployment will result in a 13% lower probability of a new graduate being in employment three years after completing education.

The Second Quarter Speech given by  Andrew G Haldane Chief Economist Bank of England  30 June 2020  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Shiv Chowla and Andre Moreira for their help in preparing the text. I would like to thank Andrew Bailey, Daniel Gray, Jonathan Haskel, Gregory Kidd, Sevim Kosem, Clare Macallan, Becky Maule, Michael Saunders, Michal Stelmach, James Tasker, Silvana Tenreyro, Ryland Thomas, Jan Vlieghe and Tugrul Vehbi for their comments and contributions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  I would like to discuss today the economic outlook in the UK in the light of the Covid crisis and the way monetary policy is responding to this crisis. There is a debate about which letter of the alphabet will best describe the path of the economy, with some scepticism about the V-shaped scenario path in the Bank’s May Monetary Policy Report (MPR). It is early days, but my reading of the evidence is so far, so V.  Covid-19 is, first and foremost, a global public health crisis. The measures put in place to contain the spread of this terrible disease have been necessary, but have had severe economic and financial consequences. As a result, most countries around the world are facing a twin crisis of public and economic health. The economy in the period ahead will continue to be shaped by the virus and policy responses to it.
In this context, there has been an increase in the willingness to take on risk in financial markets, increasing stock market indices, reducing sovereign risk premiums and increasing capital flows to emerging markets. Commodity prices have also benefitted. Copper, our main export product, has been trading at prices near two year highs and prospects for the next few years have improved, which has had a material impact on the Chilean terms of trade. Thus, based on better growth prospects for our trading partners, favorable external financial conditions and increased terms of trade, the baseline scenario included in the Monetary Policy Report published at the beginning of April, considered that, for the next two years, the Chilean economy will receive an external impulse higher than considered at the end of 2016 (Figure 1). 1/ Keynote speech at the VI JP Morgan Southern Cone and Andean Opportunities Conference, April 25th, 2017. This speech  is based upon that delivered at The Council of the Americas, April 20th, 2017. Figure 1 Trading partners GDP  Terms of trade (*)  (annual change, percent)  (index; 2013=100)  4.5  4.5  4.0  4.0  105  105  Mar.17  100 Mar.17  3.5  100  3.5 Dec.16  Dec.16 3.0  3.0  95  95 Sep.16  Sep.16 2.5  2.5  Avg. 00-07  Avg.

The second reason is that domestic markets and economic agents have been able to adapt to changing circumstances. In the labor market there has been substantial mobility between sectors and from salaried to self-employment, while nominal wages and working hours have adjusted gradually. The corporate sector has cut on costs, improved operational efficiency and refinanced its debt. Financing conditions have remained historically favorable and banks have adjusted loan-loss provisions without rationing credit. 21. The above indicates not only that the Chilean economy has become more resilient than in the past but also that it is well prepared to resume growth. In fact, there are no major macroeconomic constraints to grow beyond the current rates. On the one hand, financial conditions are highly favorable and corporations and financial institutions face no liquidity constraints. On the other, with a current account deficit of 1.6% of GDP, Chile has little pressure from external savings. Finally, public net debt is only slightly positive and there is very little risk of crowding out private investment.
In addition, the extensive use of adjustable-rate mortgages in Norway is probably the reason why movements in house prices are more pronounced here than in other countries. In recent months, there have been signs of an impending turnaround in the housing market in Norway. The rise in house prices has slowed. The housing supply has increased considerably this year and in September reached its highest level since November 2002. In the last three months, prices have fallen when the figures are adjusted for normal seasonal variations. There is none the less no definitive evidence that we are approaching a more long-term decline. Demand for housing in Norway has also been supported by strong economic growth and a marked rise in the number of households. 12  BIS Review 115/2007  Intensified competition for market shares has put pressure on banks’ lending margins. In recent years, mortgage borrowing rates have not always risen in pace with Norges Bank’s key policy rate. The introduction of new capital adequacy requirements (Basel II) has also influenced banks’ lending margins. Under Basel II, risk weights on lending are required to reflect differences in risk to a greater extent. Risk weights for mortgages, for example, have been sharply reduced. This will lead to a considerable reduction in capital adequacy requirements for Norwegian banks. The new rules were introduced in Norway in 2007, but it is likely that many banks began to adjust to the effects even before the rules were introduced. This has resulted in a fall in banks’ interest margins.

Alternatively, they can sell their house at a profit. In 2006, there was a turnaround in the US housing market and house prices began to fall. This pulled the carpet from under many investments and resulted after a period in rising  BIS Review 115/2007  1  defaults on mortgages. These developments then triggered widespread turbulence in money and credit markets. The US mortgage market has gradually developed into a complex structure with a large number of participants. The distance between borrower and investor can be considerable. The chart shows possible interlinkages in the US subprime market. There is a long chain of intermediaries. On the one side is a borrower who wishes to take out a mortgage in order to buy a house. Between the borrower and the lender is an agent who functions as sales channel. The lender is a financial institution specialising in granting and following up these mortgages. The first special purpose vehicle buys the mortgage and packages it with other mortgages. The mortgages are financed by securities split into tranches. The mezzanine tranches are sold to another special purpose vehicle, which repackages them and issues CDOs split into tranches. A third special purpose investment vehicle invests in the senior tranches and obtains its financing by issuing asset-backed commercial paper. The commercial paper is bought by a money market fund, which in turn has received its capital from savers. Banks can be involved in all stages of the chain.