samchain/econo-pairs-v1 huggingface dataset:
François Villeroy de Galhau: Monetary policy in the present environment - reconciling clarity and flexibility, as well as independence and cooperation Remarks by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Group of Thirty's annual International Banking Seminar, Bali, Indonesia, 14 October 2018. * * * Good morning. Let me begin by thanking the organisers of this seminar for the opportunity to speak on such a distinguished panel. I’d like to elaborate on two challenges. The first is domestic and concerns how we, as Euro-area central bankers, decide and communicate about the gradual normalisation of our monetary policy in uncertain times. The second challenge is a collective one: how we co-ordinate facing diverging economic paths. ** 1. Our domestic challenge in the euro area: combining clarity and flexibility The Euro-area is experiencing a broad-based economic expansion. Q2 2018 was the 21st successive quarter of economic growth. 9.2 million jobs have been created since 2013 and the unemployment rate has fallen from 12.1% to 8.1%, although this figure is still too high. There are increasing signs that the labour market is tightening and nominal wage growth is picking up: the Phillips curve is back to work, albeit a bit later than expected. The output gap was probably closed by the end of last year.

In many cases, this divergence reflects differences in the economic cycle and idiosyncratic shocks. More worryingly, from a systemic point of view, however, is that some countries might be suffering from the ongoing rise in US interest rates. Helene Rey’s famous paper in 20133 argued that floating exchange rates are not sufficient to give countries independence from US monetary policy if they have an open capital account. If the trilemma is in fact a dilemma, then countries will have to choose between monetary independence and closing their capital accounts. I would contest the generality or starkness of her dilemma. For example, I think the euro area can determine its own course. Our asset purchase programme has contributed to a spread exceeding 250 basis points between the 10 year yields in the US and in Germany. Likewise, the gap between policy rates in the US and the euro-area is the widest since 2009. More technically, an estimated Taylor rule for the euro area that includes US monetary policy as one of the explanatory factors finds only a very modest co-movement between the two. Countries instead seem to be arranged along a continuum, with some exhibiting total independence at one end to those with exchange rates pegged to the US dollar at the other. Countries don’t have to choose one of the two polar positions but can pick an intermediate position. For example, putting some temporary restrictions on cross-border movement of capital could give some but not complete independence of monetary policy.
Global economic outlook  Let me turn to the global economic outlook. Growth was modest in the advanced economies in the first quarter of 2023. Although inflation declined again in many countries, it remains clearly above central banks’ targets. Core inflation in particular is still stubbornly elevated. Page 2/8  Zurich, 22 June 2023 Thomas Jordan, Martin Schlegel and Andréa M. Maechler  News conference  Against this background, numerous central banks have tightened their monetary policy further, albeit at a somewhat slower pace than in the previous quarters. The growth outlook for the global economy remains subdued. This is in particular attributable to the loss of purchasing power due to inflation in recent quarters and to tighter monetary policy. At the same time, inflation is likely to remain elevated worldwide for the time being. Over the medium term, however, it should return to more moderate levels, not least thanks to the more restrictive monetary policy and due to the economic slowdown. Our scenario for the global economy remains subject to large risks. In particular, the high level of inflation in some countries could be more persistent than expected. Equally, the energy situation in Europe could deteriorate again in Q4 2023 and Q1 2024. Swiss economic outlook  What is the economic outlook for Switzerland? GDP growth was solid in the first quarter of 2023. The services sector gained momentum, and there was also a slight increase in value added in manufacturing. The labour market remained robust, and overall production capacity has been well utilised.

The Bounce Back Loan Scheme 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  guarantees 100% of loans of up to £ to small businesses. Banks are taking little risk with their own funds when they lend now. With the space to lend, the funding to lend, and the credit guarantees to lend, banks have every assistance to help businesses finance cash-flow deficits. And unlike in the financial crisis, the banking system has the strength to lean into this crisis, to refinance existing loans and meet the demand for new ones. Banks will face losses in coming months on loans made in the past as some businesses and households struggle to meet repayments. Due to the reforms of the past decade, banks have the buffers of their own shareholders’ capital to absorb those losses on existing loans without cutting back on support for new lending.6  The final element of the support for bank lending has been to allow banks to use their buffers of capital without fear of regulatory actions. Buffers of capital are there to be used in stress to absorb losses while continuing to lend. We expect them to be used as needed.7 In fact, with government guarantees and funding in place, the prudent thing for banks – collectively – to do is lend. Failure to help the corporate sector finance its cash-flow deficit will result business failures and unemployment that create greater losses for banks on their existing loans.
I will not attempt to do any analysis here but I will limit my remarks to saying that the inflation targeting and the flexible exchange rate regime we have chosen in Albania has served us perfectly well. 1/3  BIS central bankers' speeches  Our monetary framework has strengthened our successful transition and has increased the resilience of our economy. Over the past two decades Albania has enjoyed: (i) rapid economic growth, – with GDP growth averaging at 5 percent; (ii) price stability, – with inflation rates averaging at 2.4 percent; and, (iii) a rapid monetization, – with financial assets increasing from 52 to 92 percent of GDP. Furthermore, the flexible exchange rate has proved to be a reliable shock absorber. The Albanian lek depreciated by around 11% in the aftermath of the 2008 crisis. This depreciation occurred in the face of reduced external demand, decreased capital inflows, and higher risk premia in the domestic financial market. This helped us regain some external competitiveness, but it also allowed us to pursue an expansionary monetary policy and to avoid recession. 2. Exchange rate movements under an inflation targeting regime  An exclusive commitment to price stability does not necessarily mean that central banks can afford to ignore exchange rate movements. In small open economies, such as ours, exchange rates have both, a direct effect on prices through the imported goods, and an indirect one through their impact on cost competitiveness, external balances and aggregate demand.

Economic outlook: tug of war between improving fundamentals and fiscal restraint The U.S. economy remains on the slow growth track that has persisted since the recession ended in mid-2009. In fact, in 2012 real GDP grew just 1.6 percent, below the 2.2 percent rate of the preceding two years. This lackluster and disappointing performance masks the fact that the underlying conditions that support growth are gradually improving. However, in the near-term, this improvement in fundamentals is being offset by increased fiscal drag. Let’s first examine the fundamentals, which have improved in at least six ways. First, household deleveraging is now well advanced. Household debt has declined significantly relative to income (Exhibit 1). In the same vein, the household financial obligations ratio has fallen to levels last seen in the early 1980s (Exhibit 2).1 Second, the structural adjustment in housing has largely run its course. Activity and prices are firming, supported by low interest rates. Over the past four quarters, housing starts rose by 33 percent, existing home sales climbed by 12 percent (Exhibit 3), and home prices, as measured by the CoreLogic national home price index, were up over 7 percent (Exhibit 4). Although the pace of recovery varies regionally, the U.S. housing sector as a whole is now clearly rebounding. I see the recovery in home prices as particularly important. Houses are a significant component of household wealth. In addition, as home prices begin to rise we are likely to see more transactions and more building activity.
Banks’ accountants and auditors are now working hard to calculate losses and reductions in earnings. It is also important to limit the macroeconomic effects so that banks can put this episode behind them as soon as possible. At the same time, we know – not least from the Nordic countries’ experience in the 1980s and 1990s – that the situation is demanding when the value of collateral falls. The most realistic scenario is therefore that it will probably take time for the turbulence to abate. There are important lessons to be learned here. The turbulence has revealed a number of shortcomings, primarily in the markets themselves, but also in the regulatory and supervisory systems. First, it became apparent that there are serious shortcomings in the originate-and-distribute model. Banks used to retain mortgages on their balance sheets. They had an incentive to assess the credit risk carefully in order to avoid losses. Now it has become common for banks to grant mortgages and then sell them in capital markets, to investors that have traditionally purchased securities, such as pension funds and life insurance companies, but also to special purpose vehicles established for this purpose. The mortgages have thus been removed from the banks’ balance sheets, leaving the banks apparently free of credit risk. The sale of mortgages via the securities market can diversify risk and make the financial system more stable and robust. However, the risk has proved to be considerably more concentrated than participants themselves or supervisory agencies had believed.

Lee Hsien Loong: Credibility, confidence, dynamism: MAS in the new economic and financial landscape Address by Mr Lee Hsien Loong, Deputy Prime Minister of Singapore and Chairman of the Monetary Authority of Singapore, at the MAS 30th Anniversary Conference, Singapore, 20 July 2001. *  *  *  Introduction It is a great pleasure for me to welcome you to MAS’ 30th Anniversary Conference. We are honoured to have with us so many distinguished central bankers, financial supervisors, market participants and economists. A new economic and financial landscape is emerging. Financial markets are becoming globalised; cross-border capital flows are larger and faster; financial institutions are consolidating and restructuring on a massive scale; and new and complex financial products are emerging, driven by technology and market pressures. Amidst these upheavals, MAS’ goals as a central bank remain unchanged: low inflation for sustained economic growth, and a sound financial sector for markets to grow and thrive. MAS is a unique organisation – it is the only institution in the world that combines responsibility for monetary policy with supervisory oversight of the entire financial sector – banking, insurance and securities. In addition, it has the task of promoting the development of Singapore as an international financial centre. I shall describe how MAS has met its responsibilities in these three areas over the past 30 years, some of the key events that have shaped our policies, and how we intend to move forward in the new economic and financial landscape.
As a result of slowing growth, I anticipate the unemployment rate will rise from its current level of 3.7 percent to around 4-1/2 percent by the end of 2023. And with regard to inflation, I expect the combination of cooling global demand and steady improvements in supply to result in falling rates of inflation for goods that rely heavily on commodities, as well as for those that have been most affected by supplychain bottlenecks. These factors should contribute to inflation declining to about 3 percent next year. Bringing down underlying inflation-the inner layer of the inflation onion-will take longer, but with monetary policy helping to restore balance between demand and supply, I see inflation moving close to our 2 percent goal in the next few years. Conclusion Tighter monetary policy has begun to cool demand and reduce inflationary pressures, but our job is not yet done. It will take time, but I am fully confident we will return to a sustained period of price stability. 1 Board of Governors of the Federal Reserve System, Federal Open Market Committee  reaffirms its ""Statement on Longer-Run Goals and Monetary Policy Strategy, January 25, 2022. 2Ruchi Avtar, Rajashri Chakrabarti, and Maxim Pinkovskiy, "Was the 2021-22 Rise in  Inflation Equitable?" Federal Reserve Bank of New York Liberty Street Economics, June 20, 2022. 3 Federal Reserve Bank of New York, Global Supply Chain Pressure Index. 4 Board of Governors of the Federal Reserve System, Federal Reserve Issues FOMC  Statement, September 21, 2022.

Today, the applications of Shariah precepts differ somewhat in certain areas. It will eventually be desirable to have some standardisation to enhance consistency and to remove one source of regulatory risk. However, our goal should be to achieve a gradual harmonisation of standards and approaches to regulation, rather than immediate convergence. Even in conventional finance, regulatory approaches and standards differ across different jurisdictions. A flexible, riskbased approach will also allow continued innovation to take place, while ensuring the resultant risks are appropriately managed. Second, we need to develop a wider range of tools to detect and mitigate risks. In conventional finance, work is underway in reviewing shortcomings in capital adequacy and liquidity management in the Basel II framework, as well as the provision of clearing and settlement infrastructure for derivatives. For Islamic Finance, we need to continue to develop instruments that help to mitigate risks. Bahrain’s initiative in developing the Liquidity Management Centre 7 is an excellent example of such an effort. In this regard, I am pleased to announce that the Monetary Authority of Singapore is now in the final stages of setting up a sukuk issuance facility. I had announced, at this May's Islamic  4  MoneySENSE is a national financial education program in Singapore covering three tiers of financial literacy – basic money management; financial planning; and investment know-how. Details on MoneySENSE are available at www.moneysense.gov.sg. 5  Murabaha-based asset financing refers to mark-up asset financing, commonly used in home financing and car financing.
8  Since 2007, annual average growth in participation rates has increased by 3 basis points for those between 50 and 59 years old to between 10 and 15 basis points (Table 1). For those over 65, the increase in participation growth rates has been around 6 basis points. Growth in participation rates also increased by around 5 basis points for those in age cohorts between 35 and 49 since 2007. 9  Banks et al (2005) find that those in (predominantly final-salary) employer defined benefit plans report chances of working at age 60 that are, on average, 3 percentage points lower than those of individuals in the State Earnings-Related Pension Scheme (SERPS), an average-earnings-based defined benefit scheme. Those with defined contribution pension arrangements report probabilities up to 7 percentage points higher than those in SERPSs. See Banks, J, Emmerson, C and Blundell, R (2005), “The balance between defined benefit, defined contribution, and state provision”, Journal of the European Economic Association, 3(2–3): 466–76. 10  Cribb et al (2014) find that women’s employment rates at age 60 increased by around 7 percentage points when the state pension age was increased to 61. Male partners’ employment rates also increased – by around  4  BIS central bankers’ speeches  Reforms to the UK’s welfare system, including attaching job-search conditions to welfare payments, could have prompted those affected to seek work.

The growing internationalisation and cross-border activities in Islamic finance in recent years further accentuates the importance to enhance the ability of the Islamic financial system to withstand shocks from externalities. Moreover, access to a robust liquidity management infrastructure will reduce the cost of intermediation which is an important enabler for a more efficient and competitive Islamic financial system. Recognising that liquidity management in the Islamic financial system is still under-developed, a Liquidity Task Force was established by the IFSB in 2009 with the aim to formulate an institutional arrangement to address this need. Significant progress has already been made in this endeavor with several key proposals now at the final stage for operationalisation. When operationalised, this liquidity mechanism will be another landmark development for Islamic finance. Conclusion The recent global financial crisis has spurred the resolve of the world community to chart a new course towards greater and lasting social and economic stability with fairness and accountability. Whilst this presents a unique opportunity for Islamic finance to transition into the next development stage of greater international integration, there needs to be a higher level of resilience to withstand the new challenges it will bring. This, in essence, requires the strengthening of the financial infrastructure to preserve the soundness and stability of the Islamic financial system. Indeed, our collective will to mobilise a higher level of global cooperation in promoting this outcome will enhance the prospects of Islamic finance to contribute towards securing global financial stability and a greater shared prosperity. 6  BIS Review 64/2010
Mr Chairman, I am informed that one of the notable projects being undertaken collaboratively is on ICT Governance implementation within the central banks using the Control Objectives for Information and related Technologies (COBIT) framework. BIS Review 42/2008  1  Ladies and Gentlemen, you will be delighted to learn that just last week a number of board members from central banks in Africa and across the world converged here in Livingstone to discuss the subject “Trends in Central Bank Governance”. Indeed good corporate governance is generally acknowledged as important in economic management and therefore, the role that ICT Governance plays, in this regard, can not be over emphasized. I am also informed that this conference will discuss some of the solutions available for implementing Business Continuity Planning (BCP) and the progress so far made in this regard. Indeed business continuity planning and management for ICT resources is critical to the operations of our Central Banks. The level of investment and dependence on ICT services is significant and few organizations could operate for long today without these resources. I therefore urge you to critically review this area that is equally important to the implementation of good corporate governance. Mr Chairman, allow me also to talk about financial inclusion or access to finance for all. Ladies and Gentlemen, as you are aware most of our rural areas are mostly unbanked due to infrastructural obstacles.

Mr Chairman, it is pleasing to note that the SADC Information and Communications Technology (ICT) Forum will this year be hosting its 13th Annual conference in Livingstone, Zambia. Bank of Zambia, is therefore pleased to join other sister Central Banks who have previously hosted this Annual Conference. Distinguished Delegates, as you are all aware, Information and Communications Technology (ICT) plays a strategic role in the day to day operations in all our Central Banks. The rapid evolution of ICT, which is generally called the “ICT revolution”, has been exerting a profound impact on the world’s economies. As we all can acknowledge, technological innovation has brought about the speedy processing and transmission of information, resulting in substantial reduction in costs, wider networking, and globalization on an unprecedented scale and scope. Distinguished Delegates, the central banks within the SADC region have registered significant developments and advances in the areas of Payment Systems, Website development, and Banking Supervision Application, just to mention a few projects emanating from the SADC ICT Forum initiatives. These projects have been possible and successfully implemented largely due to the co-operation and collaboration that exists between the Central Banks in the region. The issues that will be discussed at this Conference are very important in the context of the realization of some of the key objectives of our central banks that can only be achieved through sound implementation of the ICT solutions. This Conference, therefore, offers all of us various opportunities to effectively contribute to positive developments of our central banks.