samchain/econo-pairs-v1 huggingface dataset:
Paul Tucker: A protracted “peacetime” Remarks by Mr Paul Tucker, Executive Director and Member of the Monetary Policy Committee of the Bank of England, at the Chatham House Conference on “The new financial frontiers”, London, 29 April 2008. *  *  *  The turmoil and stress in the global financial system has now been going on for nine months or more. Much has been said about the “wartime” conduct of the authorities, the banking industry and asset managers. But the seeds of the current stresses, and many of the remaining risks, lie in the preceding period of “peacetime”. The main purpose of my remarks this morning is to underline that the community must not in the future lose sight of the need to head off the risks that can creep up during a prolonged period of “peace”. The recent period of peacetime was long enough for substantial macroeconomic imbalances to build up, globally and domestically. Long enough for innovations in financial intermediation to mask, from many, the degree of leverage in the system. Long enough for many to assume that funding structures could be chosen on the basis of deep liquidity being maintained in a range of new asset markets. Long enough for most with long memories to be tending their gardens.

But, absolutely crucially, we also face a nasty shock to costs from rising commodity prices and sterling’s depreciation. That is going to push up UK inflation over the next few months, creating a risk of upward pressure on pay and higher inflation expectations. The MPC’s strategy to date has been clear: to offset part but not all of the shock to demand, consistent with an overriding determination to maintain medium-term inflation expectations anchored to the 2% target. The path of rates will depend on judgments about the balance of those risks to the inflation outlook. And, in the context of my remarks today, that is different from a “mopping up” strategy involving simply reducing rates enough to offset estimates of the effect of the demand shock plus some insurance on top of that. Central bank liquidity policy: the Social Contract If monetary policy has been constrained in alleviating the consequences of the financial turmoil, so too, for different reasons, has central bank liquidity policy in many centres. For over a century – coincident with the development of central banking – there has effectively been a Social Contract between the banking system and the authorities. On one side of the Contract, commercial banks have been permitted to profit from maturity transformation, turning liquid savings into illiquid loans. Commercial banks’ ability to do this relies on their deposit liabilities being a universally acceptable means of payment, money. But maturity transformation – borrowing short to lend long – is risky; it relies on confidence.
Our third core purpose - the promotion of the efficiency and effectiveness of the financial system in serving the interests of the wider economy - was more unusual for a central bank, but arose from a long-standing tradition of catalytic involvement in the development of our financial system, including, in its international dimension in particular, encouragement of the role of the City. These three core purposes have been essentially carried over into the new statutory framework introduced through the Bank of England Act of 1998. There are certainly some very important changes in the more precise nature of the Bank’s role. In relation to monetary stability, the Bank, through its new Monetary Policy Committee, now has independent responsibility for the operation of monetary policy and for achieving consistently low inflation as defined by the Chancellor. And in relation to financial stability, responsibility for banking supervision has passed from the Bank to Howard at the FSA - which helps to explain why I have retained more of my hair ... than ... I might otherwise have done! But, notwithstanding these important changes, our core purposes remain. The Memorandum of Understanding between the Treasury, the Bank and the FSA, in particular defines our respective responsibilities in relation to financial stability and provides a structure for the necessary close cooperation between us. In the terms of the MOU the Bank is responsible for the overall stability of the financial system as a whole.

Turning to the identification of the problems posed by part of our banking system, the government and Parliament reacted promptly. As early as 2009 the FROB (Fund for the Orderly Restructuring of the Banking Sector) legislation was approved, allowing the start of the restructuring of an extensive number of savings banks. And, whenever necessary, the government and Parliament have not hesitated to adopt further legislation so as to speed through and conclude this process, as evidenced by the approval of the Savings Bank Law in 2010 and, more recently, the passing of the Royal Decree-Law on the capitalisation of our credit institutions. The fact these regulations have been approved with an acceptable degree of Parliamentary consensus is most positive. In this case, as in that of cutting the deficit, it is expected that savings bank restructuring will be completed how and when the Parliament has decreed. Despite affecting a limited part of the banking system, the restructuring has generated such noise that the doubts as to whether the legislator should have adopted more drastic solutions are understandable. But I  BIS central bankers’ speeches  1  should say that some of the alternatives, such as injecting capital into the savings banks without making this conditional upon their restructuring and resizing, might have entailed more disadvantages than advantages, compared with the option actually chosen by the legislator.
Lars E O Svensson: Flexible inflation targeting – lessons from the financial crisis Speech by Mr Lars E O Svensson, Deputy Governor of the Sveriges Riksbank, at the workshop “Towards a new framework for monetary policy? Lessons from the crisis”, organized by the Netherlands Bank, Amsterdam, 21 September 2009. I am grateful to Claes Berg, Ylva Hedén, Jonas Niemeyer, Virginia Queijo von Heideken, Annika Svensson, Ulf Söderström, Staffan Viotti, Anders Vredin, Karl Walentin and, especially, Björn Lagerwall, for comments and help with the speech. The views presented here are my own and not necessarily those of other members of the Riksbank’s executive board or staff. * 1. *  *  Introduction  The financial crisis has raised some questions regarding monetary policy and how it should be conducted in relation to financial conditions such as credit growth, asset prices, imbalances, the risk of creating bubbles and so on. I will discuss two particular questions: Has monetary policy contributed to the conditions for the crisis? Do the lessons from the crisis justify any changes in the way best-practice monetary policy should be conducted? I will lay out my pre-crisis view of best-practice monetary policy – flexible inflation targeting – and its relation to financial stability and asset prices, discuss the role of monetary policy in possibly contributing to the current financial crisis and, finally, present my conclusions on whether flexible inflation targeting needs to be modified in the light of the crisis. 2.

This must be done without haste, but no stone should be left unturned. Improved regulation appears to be necessary in several domains, from rating agencies to risk management, the organisation of financial markets and even the question of compensation. As a contribution to this debate, I would like to make two sets of remarks. One has to do with the fluctuations of financial systems. The other concerns financial supervision. Financial systems that operate in the context of a developed market economy are, by nature, subject to cyclical forces. Some are a consequence of the business cycle. Credit activity is an obvious example, as credit demand is heavily influenced by economic activity. Others are from within financial systems. For instance, financial institutions’ equity position moves in line with asset prices specially in a fair value world where fluctuations result in capital gains or  BIS Review 143/2008  3  losses. This effect tends to be exacerbated when financial intermediaries actively manage their balance sheets to target a preferred degree of leverage. The challenge for the authorities is to assess whether and to what extent regulations reinforce these dynamics and impact the entire financial system. With these questions in mind, work is being undertaken to examine the impact of prudential standards. It is also on this basis that the accounting adjustments that I mentioned earlier have been made. We will have to set up supervisory systems that are more suited to economic developments. The need to develop a “macro-prudential” policy is now under debate.
As Greg Mankiw put it: “Wishful thinking is one reason that monetary policy has historically been excessively inflationary… To my mind, wishful thinking is as worrisome a problem for monetary policy as time inconsistency.” Genuine concern for the unemployed means a recognition that sustainable reductions in unemployment require a combination of monetary stability on the demand side and microeconomic reforms such as the New Deal on the supply side. As Alan Blinder has reminded us, we need soft hearts and hard heads, not the other way round. Despite suggestions to the contrary, the MPC does have soft hearts and hard heads, and does not base its assessment of the labour market – never mind its decisions on interest rates – solely on estimates of the growth of average earnings. An assessment of the overall tightness of the labour market requires all the available data – both quantity and prices – to be analysed. The wealth and diversity of published labour statistics means it is rare for them all to point in the same direction. The MPC’s analysis of the labour market is like the construction of a jigsaw puzzle. The pieces of data are assessed alongside each other in order to build up as clear a picture as possible. No single piece of data is interpreted in isolation. And no single piece of data is, in itself, decisive. The growth of wages and salaries is an important indicator of domestically generated inflation.

This differs from the natural rate when macroeconomic shocks affect the rate of inflation corresponding to any degree of excess demand in the labour market. Since the NAIRU represents the current reduced-form relationship between inflation and unemployment, it is possible to calculate the prospects for inflation without any need to refer to such a variable as the NAIRU. It is a convenient shorthand concept for purposes of exposition, but not a necessary tool for operational decisions on interest rates. Second, the contribution of monetary policy to employment objectives is to promote economic stability in its broadest sense. I referred at the outset to Keynes’ view that the “triple evils” of an unequal distribution of income, instability of expectations and unemployment were all related to an unstable and unpredictable monetary standard. The solution, Keynes suggested, was to set monetary policy to hit a target for prices, or a low and stable inflation rate. He argued 75 years ago that monetary policy should be devoted to regulating the supply of money so that “the index number of prices will never move far from a fixed point”. Keynes went on to say that: “The Bank of England since the war has always done exactly the opposite of what the latest science recommends. I conclude from this that their opposition comes, not from mere obstinacy BIS Review 103/1998  – 10 –  or conservatism, but from their not yet understanding the point.
Second, the forecast depends not only on future interest rates but lots of other conditioning assumptions as well, any of which can shift from one quarter to the next. So even to the extent you can infer anything from the forecast about the MPC’s view of the yield curve, this too can only ever be a highly conditional inference. Perhaps that’s why the two-year inflation is not actually a very good predictor of changes in interest rates (as we shall see). Empirically, what matters more is the subsequent evolution of the economy. Another difficulty is that the yield curve may not actually be giving us a pure read on the market’s interest-rate expectations to begin with. It’s long been recognised that forward yields, even on “risk-free” instruments like government bonds, can be affected by shifts in risk or term premia. The MPC’s forecasts are conditioned on the yield curve as it is, not what we believe the market’s true expectation to be. So, in and of itself, this doesn’t invalidate the sort of inferences we’re talking about. But it’s certainly a complicating factor. BIS central bankers’ speeches  1  Flexible inflation targeting Let me expand on the first point with the help of some simple simulations, performed using the Bank’s COMPASS model of the economy.

Public demand has also stimulated the economy. Chart: Relative labour costs The Norwegian krone has depreciated markedly in the wake of the fall in oil prices and is now approximately 15 percent weaker than two years ago. The depreciation has led to a marked improvement in Norwegian firms’ cost competitiveness. The main responsibility for developments in relative wages lies with the social partners. If the improvement in competitiveness is to be sustained, Norwegian labour costs must develop more in line with the labour costs of our trading partners. This will make it easier to build up a larger non-oil tradable sector. The krone depreciation has helped start the restructuring process in the Norwegian economy. After a decade of higher growth in imports than mainland exports, export growth has recently outpaced import growth. The tourism industry is one of a number of industries experiencing an upswing. Many export firms have announced plans to increase investments in 2016, which will provide opportunities for an increase in production and market shares. Chart: Unemployment Employment in Norway has been high for many years. Compared with other countries, unemployment has been low. In the competition for labour resources, oil production and oil service companies have drawn the longest straw. The situation has now changed. Unemployment has increased over the past year. Regions with close links to the oil industry, 2  BIS central bankers’ speeches  which have benefitted from the oil boom for many years, are being hit hard. Although employment continued to rise last year, employment growth has slowed.
Norman T L Chan: A new era of smart banking Opening keynote speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at HKIB (The Hong Kong Institute of Bankers) Annual Banking Conference 2017, Hong Kong, 29 September 2017. * * * Dr Patrick Fung, Ms Carrie Leung, Vice President Pan Guangwei, distinguished guests, ladies and gentlemen, good morning to all of you! The theme of my speech is “A New Era of Smart Banking”, “智慧銀行新紀元 ” in Chinese. In the last few years, we have frequently come across two comments amongst the fintech community. The first comment is that Hong Kong is very backward in fintech, quoting mobile payment developments in Mainland China as the evidence. The second is that fintech will disrupt or displace traditional banking. I must say I don’t agree with these two comments for two main reasons. First, Hong Kong has not been slow in developing and adopting fintech. It is not entirely appropriate to use mobile payment as the only benchmark for measuring the state of development in fintech. There are many other important aspects of developments that define the maturity of fintech developments, such as the use of digital or internet banking and the robustness of cybersecurity. Even in the field of mobile payments, we should appreciate that Hong Kong already has a well-developed electronic payment ecosystem. In 2015, each Hong Kong citizen had on average 2.6 credit cards, compared to 0.3 credit cards per person in Mainland China.

FPS operates 24 x 7, which means that users can initiate or receive a payment or fund transfer any time throughout the year. It will be very user-friendly as mobile phone numbers or email addresses can be used for receiving HKD or RMB funds. Settlement between banks is real-time, and Hong Kong is one of the few jurisdictions achieving real-time settlement in a retail payment infrastructure. Both banks and SVFs can participate in FPS. This creates a retail payment ecosystem that facilitates money transfers among users of banks and SVFs. The full interconnectivity of all payment participants is, again, likely to be one of first in the world. In addition to FPS, the HKMA is leading a working group to work on a common QR code standard for retail payments. A common QR code standard will facilitate merchants, especially SMEs, in using one single QR code to accept different payment schemes. This would certainly help promote the wider use of mobile retail payments in Hong Kong. 3/6  BIS central bankers' speeches  (B)  Supervisory Sandbox 2.0  The HKMA will upgrade the existing Fintech Supervisory Sandbox to Sandbox 2.0. There will be three new features in this enhanced version. First, we will set up a Fintech Supervisory Chatroom that would engage the stakeholders at a much earlier stage of project development. The Chatroom will be manned by experts from our Fintech Facilitation Office and Banking Supervision Department.
It could be yet another symptom of long-running but difficult-to-model trends in the economy, such as structural change in the patterns of production, job polarization, and changes in social programs, which particularly impact the lower-skill work force. 6 Regardless, the divergent work behavior across education groups strikes me as an important fact and deserving of much further research attention. The declining trend in labor force participation also influences how fast the economy can produce new jobs in the long run. Our estimate of the trend in payroll employment growth over the past 15 years averages roughly 100,000 jobs per month. Looking ahead, we think that declines in the labor force participation rate and population growth will bring the trend in payroll employment growth down to fewer than 50,000 jobs per month by 2016. This new benchmark probably will only become apparent in the monthly data once the economy closes the current 3.8 million employment gap. But barring sizable changes in immigration policy, policymakers and the public will need to get accustomed to a slower base of employment growth by the latter part of the decade. Job openings and hiring This brings me to the issue of hiring and job openings. The job openings rate, as measured by the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) data, started climbing immediately after the recession and made it back to its pre-recession  3  Aaronson and Sullivan (2001). 4  Aaronson et al. (2014).

Second, as I’ve noted many times in the past, a symmetric inflation target means we should be averaging 2 percent inflation over time. We’ve averaged well under that 2 percent mark for the past six and a half years. With a symmetric inflation target, one could imagine moderately-above-target inflation for a limited period of time as simply the flip side of our recent inflation experience – and hardly an event that would impose great costs on the economy. The murky state of inflation expectations is another factor that enters my risk-management considerations. For inflation to take off rapidly, we would have to see a jump in inflationary expectations. But inflationary expectations have been quite stable. Indeed, we may be facing a quite different problem. Many forecasters – myself included – assume that stable 2 percent inflation expectations will be an important factor helping to pull actual inflation up. Over the past five years, professional forecasters’ projections for long-run inflation have been at the 2 percent target and Treasury Inflation-Protected Securities (TIPS) break-evens have been flat. Yet actual inflation has only just recently made it back up to 1-1/2 percent. Moreover, we still have not seen much at all in the way of higher inflation compensation being built into interest rates or wages. So there is cause for concern that expectations might not produce as strong a pull on inflation as we hope. We can turn to the Japanese experience again to highlight this risk.
Annuity writers should be cautious in changing their longevity assumptions. For example, the annual data can be volatile because of factors such as the failure of flu vaccines. Moreover, the slowdown in the rate of improvement in life expectancy appears less marked amongst wealthier people, who are represented disproportionately in annuity portfolios. Nonetheless, we have concluded that we should make some changes to our quantitative indicators in the light of recent longevity experience. These indicators are used by supervisors as one input into our review of whether insurers’ models meet Solvency II tests and standards. Third, we will soon complete the first full cycle of Solvency II reporting. Later this year, I plan to hold roundtables with insurers, investors and analysts to discuss Solvency and Financial Condition Reports (SFCRs). We are also reviewing whether an ongoing requirement for audit of every year’s SFCR is proportionate for the smallest insurers. It would be unhelpful for the PRA to be too prescriptive about the depth of content of SFCRs. But it strikes me that some areas could be made more consistent. For example, changes in Solvency Capital Requirement coverage could be broken down to show what is attributable to changes in capital, to changes in modelling and to changes in risk assumptions. Insurers need to explain fully to policyholders, investors and others what lies behind their Solvency II ratios. This is particularly true in more complex areas like internal models and the matching adjustment.

As if this was not enough, public sector involvement in housing finance was reformed around the same time; this structural reorganisation had unexpected multiplier effects when the recently privatised commercial banks eagerly followed that lead and ran ahead along the same path even faster than the policy makers had expected. At the same time, Icelandic banks and financial institutions have been establishing their influence in neighbouring foreign markets and, to some degree, more distant ones. The banks have expanded rapidly and are now very large relative to Iceland’s domestic economy, and in fact by any measure. Their international activities have also created a new situation that has sometimes been called “the problem of explaining the Icelandic economy”. Although I feel that this problem is overstated because it must surely be temporary, it cannot be denied that the Icelandic currency itself, and its small size, are recurrent themes. The economic factors I mentioned earlier have driven strong inflationary pressures in Iceland, which have partly appeared in the form of higher measured inflation, but have to some extent been contained by Central Bank policy rate decisions, which in turn have affected the exchange rate of the Icelandic króna, at least for some while now. And in combination, these two factors have raised yet another question that is relevant to this conference. That is to say, these special conditions have inspired new investors, the carry traders, to venture to our shores.