samchain/econo-pairs-v1 huggingface dataset:
Anita Angelovska Bezhoska: How to make capitalism work for all Speech by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of North Macedonia, at the IMF/WB Constituency Meeting, Skopje, 22 June 2019. * * * Distinguished Prime Minister, ministers of finance and other respective representatives of government institutions, governors of central banks and other respective representatives of central banks, Executive Directors, Vice Presidents in World Bank Group Directors in International Monetary Fund, Professor Zingales, Delegates of the Constituency, excellences, fellow colleagues, representatives of the media, At the very beginning, let me say how honored we are to have the opportunity to host this important gathering of our Constituency. Sixteen years have passed since the last meeting of the Constituency in Skopje, and we are delighted to have all of you with us here during these three days. By a twist of fate, I recently came across a book that I have not seen since my early youth days; a book that starts with a very powerful notion – “Happy families are all alike; every unhappy family is unhappy in its own way” – you might recall Tolstoy’s “Anna Karenina”. Few days after, while searching for the most recent discussions on the matter of capitalism, inequality, wealth distribution, I read an analytical piece where the author cited the same quote, linking it with all the different modalities of inequality, as a symbol of the global unhappiness. Standard metrics on inequality point to a widespread and rising phenomenon.

It obviously underpins the rising populism, that reflects the dissatisfaction with the system that does not create equal opportunities for everyone, a system where reward is not merit based, i.e., system that gradually evolves into a crony capitalism. Against this background, I have no doubts that we have chosen the perfect spotlight for this Constituency meeting. Let me shortly use the historical lenses – what questioned the sustainability of capitalism and led to Marxism was the stagnation of wages and concentration of wealth in the early phases of industrial revolution. It gave ground for rising inequality, and as Thomas Pikketty, the so-called “Modern Marx” reveals in his book “Capital in the Twenty-First Century”, the only exception from this rising trend of global inequality is the period as of 1914 until 1970s, as a historical outlier. Indeed, actual data does indicate rising income inequality since the 1980s onwards almost across the board, although with different intensity. This turning point is very often associated with the end of the so-called “post-war egalitarian regime” around the globe. To bring the point closer, let me refer to the data retrieved from the 2018 World Inequality Report, which reveals that in 1980, the income share of the top 10% in the income distribution in Western Europe, North America, China and India was around 30–35%. By 2016, this percentage rose to around 35–40% in Western Europe, while the increase in the other regions was stronger, reaching 45%-50% of the total income.
Against this background, securitisation can potentially play a vital role, and thereby strongly support the financing of the economy, in two main respects:   First, in order to mitigate the potential funding challenges that I have just mentioned, securitisation may contribute to the broadening of the funding base – both intertemporally and geographically –, by transforming illiquid assets into negotiable longterm securities (even if these may not necessarily be very liquid). It may thus help to unblock credit supply constraints in an environment of continued de-leveraging by  BIS Review 84/2010  1  taking regionally or sectorally concentrated credit risk off bank balance sheet and distributing it to a wider investor base.   Second, a proper use of financial engineering techniques, such as securitisation, may provide a better match between the preferences of borrowers and investors in terms of cash flow structure, type of interest rate, degree of risk and currency denomination. This is particularly relevant when the securitisation pool is composed of loans to borrowers who cannot have access to the capital markets on their own, i.e. households and Small and Medium Sized Enterprises (SMEs). In other words, securitisation may function as a bridge between these types of borrowers and those investors who cannot easily access these types of exposures otherwise.

So what can we do? An economic policy that is credible in the long term is, as I said earlier, a very important ingredient in this context. But it is not enough. Rules and institutes that contribute to financial stability are also necessary. This is why international organisations such BIS, IOSCO and the OECD are working to  4  BIS Review 26/2001  strengthen the financial system in various ways. In total, the work covers a dozen different areas, from overseeing and supervising the financial system to observing individual countries' economies and regulations for credit institutes. Allow me to briefly mention, in this context, the capital adequacy regulations worked out by the Basel Committee, as I feel this is a good example of how we can work internationally to create regulations and institutes that contribute to stability, without preventing the important, healthy risk taking. The Basel regulations mean in principle that the greater the risk a bank takes, the more capital it should hold. As capital costs money, the Basel regulations lead to the banks reducing their risk taking. This in turn reduces the risk of bank crises and other disturbances that would have a negative effect on economic growth arising in the financial system. If this is to function, it requires a broad geographical support, which it has. The Regulations from 1988 are applied in more than 120 countries. The Basel Committee has proposed new regulations, which are an extension of the current ones.
I am quite certain that most observers deem that this would also provide better growth over the long term. How will regulation affect monetary policy’s transmission mechanism? Another consequence of the regulation agenda is that what is usually known as monetary policy’s transmission mechanism may look slightly different in the future. More specifically, the connection between the central banks’ policy rates and the interest rates affecting households and companies may change. A stable transmission mechanism is usually an underlying assumption in economic models. This is probably a fairly good approximation under normal circumstances, but, during the crisis, it became necessary to reassess this assumption. The impact of monetary policy was affected by a decline in willingness to take risks and the impaired functioning of the interbank markets (Figure 6). 8  BIS Review 68/2010  Figure 6 Difference between interbank rates and government bond rates (TED spread) Basis points 500  500 Sweden Euro area USA United Kingdom  450 400  450 400  350  350  300  300  250  250  200  200  150  150  100  100  50  50  0  0 Jan- Apr07 07  Jul07  Oct07  Jan- Apr08 08  Jul08  Oct08  Jan- Apr09 09  Jul09  Oct- Jan- Apr09 10 10  Note. The difference is calculated as the difference between three-month interbank rate and the rate on a three-month treasury bill.

BIS central bankers’ speeches  3  Conditional inflation forecast of March 2011 and of June 2011 Percentage change in national consumer price index from previous year Inflation Forecast March 2011 (with Libor at 0.25%) Forecast June 2011 (with Libor at 0.25%) % 3 2.5 2 1.5 1 0.5 0 –0.5 2008  2009  2010  2011  2012  2013  2014  Observed inflation June 2011 2008  I nf l at i on  2009  2010 Q2  Q3  Q4  2011  Q1  Q2  Q3  Q4  Q1  Q1  Q2  Q3  Q4  Q1  2.5  2.7  3.0  1.6  0.0 - 0.7 - 1.0 - 0.2 1.1  1.0  0.3  0.3  0.6  Q2  Q3  2008  2009  2010  2.4  - 0.5  0.7  Q4  Conditional inflation forecast of March 2011 with Libor at 0.25% and of June 2011 with Libor at 0.25% 2011  For ecast Mar ch 2011, Li bor at 0.25% For ecast June 2011, Li bor at 0.25%  4  2012  2013  2014  Q1  Q2  Q3  Q4  Q1  Q2  Q3  Q4  Q1  Q2  Q3  Q4  0.4  0.5  1.2  1.0  0.9  1.0  1.1  1.3  1.5  1.8  2.1  2.5  0.5  1.4  1.3  1.0  0.9  1.0  1.2  1.4  1.6  1.8  2.2  Q1  2.6  Q2  Q3  2011  2012  2013  0.8  1.1  2.0  0.9  1.0  1.7  Q4  BIS central bankers’ speeches  BIS central bankers’ speeches  5
Firstly, banks need to continue to maintain high prudential standards so as to remain sound institutions. Next, they have to develop new strategies to continue growing strong, viable businesses. Sound institutions MAS does not seek to prevent institutions from taking risks. It is the business of financial institutions to take on and intermediate risks. But if risks are not well managed or events turn out unfavourably, institutions can incur substantial losses. No amount of regulation or supervision can completely prevent losses. On the other hand, over-regulation would curb innovation and enterprise. This was a key message in MAS’ Monograph on the Objectives and Principles of Financial Supervision in Singapore. Financial institutions therefore need to build their capacity to identify, monitor, and control the risks that they take. Banks should benchmark their risk management against international best practices. Risk management should be an integral part of their operations, and should keep pace with their business profile and with industry developments. The banking sector as a whole has done well in this respect, and we expect to see this continue. One major change in the way banks manage risks will be triggered by the new Basel Accord. Implementing Basle II will be a complex exercise but will spur banks to enhance their risk management practices. Banks need to develop robust systems and processes to make the new capital adequacy rules work.

Foreign banks have continued to expand their operations here, and many have made Singapore a regional or even global platform for important banking services. The local banks have strengthened their capabilities and expanded their range of business activities. They have built up their management teams, and made significant infrastructural investments to enhance their operational effectiveness. Fees and commissions have risen as a proportion of operating income. Banks are offering new business services, while continuing to provide affordable banking facilities to the average Singaporean. They have held their own despite the increased competition. For instance, their market share of resident non-bank deposits (both ACU and DBU) has declined only marginally from 62% to 59% over the last five years. The local banks have also improved their business and risk management capabilities. The recent change in MAS’ capital adequacy requirements is in recognition of local banks’ efforts to upgrade their risk management capabilities, and should allow them to manage their capital more flexibly. With greater financial strength from the mergers and increased competition at home, local banks have begun to venture abroad and develop a regional footprint through overseas acquisitions. Banking liberalisation When MAS embarked on the liberalisation measures, we sought to anticipate changes and trends that we were convinced were already underway. Events since then showed that we moved none too soon. Technological advances have continued unabated. The Internet for instance has proven to be an efficient and widely used alternative distribution and marketing channel, and has helped create new business models.
First of all, I would like to present a theoretical outline of how monetary policy works and then indicate 1 some relevant and realistic monetary policy objectives. I will then discuss and assess Norwegian monetary policy on this basis, including the trade-offs we face in economic policy. It is important to note that it is a question of trade-offs. We simply cannot have everything we want. 2a. How does monetary policy influence the economy? Monetary policy affects the economy through several channels, together referred to as the transmission mechanism of monetary policy. In a closed economy, monetary policy mainly works by influencing demand through changes in the real interest rate. In an open economy, monetary policy also works through changes in the exchange rate. Let us make a stylised review of what happens if the central bank raises the key interest rate. In the short and medium term, prices are relatively rigid. As a result, the short and longer real rates of interest also tend to increase when the nominal interest rate is raised. In addition, there is both a nominal and a real appreciation of the exchange rate. 1  The presentation is largely based on Svensson, Lars E.O. (2002): ‘Monetary Policy and Real Stabilization’, mimeo. Princeton University  BIS Review 49/2002  1  •  The direct exchange rate channel to inflation An appreciation will reduce prices for imported goods measured in krone terms.

Over time, growth in real wages must be consistent with growth in labour productivity. An inflation target of 2½ per cent and trend productivity growth of around 2 per cent, according to updated national accounts figures, imply annual nominal wage growth of about 4½ per cent. Under the “Solidarity Alternative” in the 1990s, a stable exchange rate and the rate of wage growth among our trading partners functioned as an anchor for the social partners. Up to 1997, this anchor remained effective. However, growth in labour costs jumped in 1998 and has since been around 2 percentage points higher than among our trading partners. Wage growth is high in relation to earnings in many enterprises. It is demanding to improve efficiency at the pace required to keep up with the rise in labour costs. 10  BIS Review 49/2002  The sharp rise in labour costs in recent years carries with it a potential for higher unemployment. The interest rate is an effective instrument for countering lower demand and growing unemployment when measures to stimulate demand do not translate into higher wage growth or unstable financial markets. However, there is little monetary policy can do to prevent an increase in unemployment that is driven by high cost inflation. Developments in wage settlements have been a driving force behind the appreciation of the krone. The foreign exchange market has responded as expected.
A central element of the core model is that agents are forward-looking, reacting to expected economic developments. In recent years, a number of central banks have developed models of this type. However, it must be stressed that our core model and the models we develop only provide a very simplified description of reality. The Bank’s forecasts are based on a broad range of different sources of information, with judgment as a substantial component. Important elements in the assessment of what a good interest rate path is – and which underline the judgment component in this assessment – are reflected in six criteria that should be satisfied. 7 The criteria emphasise that if monetary policy is to anchor inflation expectations around the target, the interest rate must be set so that inflation moves towards the target. Inflation should be stabilised near the target within a reasonable time horizon, normally 1-3 years. Assuming that inflation expectations are anchored around the target, the inflation gap and the output gap should be in reasonable proportion to each other until they close. The inflation gap and the output gap should normally not be positive or negative at the same time further ahead. In addition, interest rate developments, particularly in the next few months, should result in acceptable developments in inflation and output also under alternative, albeit not unrealistic assumptions concerning economic developments and the functioning of the economy.

Caleb M Fundanga: Review of Zambia’s economy Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Zambia Association of Manufacturer’s Annual General Meeting, Lusaka, 16 April 2010. *  *  *  The President of ZAM – Mr Chance Kabaghe The Vice Presidents (North and South) – Mr Sebastian Kopulande and Mr Eugen Appel The ZAM Executive Committee Captains of Industry Ladies and Gentlemen I feel greatly honoured to officiate at this Annual General Meeting for the Zambia Association of Manufacturers (ZAM). The Bank of Zambia and the Zambia Association of Manufacturers have a long standing relationship which is intertwined in more ways than one. I am sure that without making appropriate policies to support key sectors such as manufacturing, we would be robbing the country of the development that it deserves. I am reliably informed that ZAM has been going through restructuring in the last two years and has achieved a lot in terms of the establishment and making itself relevant not only to its members but to the Government and other stakeholders. It therefore gives me pleasure to stand before you to discuss issues that are pertinent to manufacturing. I am hopeful we will be able to understand the challenges and identify plausible ways of overcoming them for the sector to forge ahead and make a meaningful contribution to the economy. Mr President, the performance of the Zambian economy in 2009 was favourable.
To illustrate why some authors have gone as far as calling this “the credit rating crisis” (Benmelech and Dlugosz, 2009) consider that before the crisis more than half of the structured finance securities rated by Moody’s carried an AAA rating and, during the period 2007-2008, the tranches rated by Moody’s that were downgraded was close to thirty six thousand, where nearly one third of downgraded tranches bore the AAA rating. This is a complex issue, especially due to the prevailing incentives in this sector. A recurrent area of criticism on the incentives side is the simultaneous role of advisor and issuers of ratings. But the spectrum of potential conflict areas could be broader, and thus more efforts must be devoted to understanding in detail the operation and linkages of this industry. Final comments The subprime crisis has opened a debate on the risks of financial innovation. It reminds us that higher levels of sophistication do not guarantee the normal operation of the financial system. A reasonable level of regulation, control and monitoring is required. I think we should move forward in innovation processes, as they are positive, but we must move forward with caution. It is important to implement policy changes gradually to provide an adequate level of information and transparency that will ensure an adequate assessment of the risks involved. It is also crucial to review in detail the incentives and potential conflicts of interest arising from the new tools and processes.

Causes of the financial turbulences and their implications on financial regulation The subprime crisis is the result of the convergence of several elements at the same time – what some observers have called a “perfect storm.” Trying to keep things simple, the element that triggered this crisis lies in the U.S. mortgage sector and a process of rapid financial innovation. In this regard, the banking industry contributed to the lending and housing boom as follows. First, the traditional banking model – hold loans until they are repaid – was replaced by a distribution model, where loans are pooled, tranched, and finally sold via securitization to other financial investors, thus this process led to banks’ off-loading risk. Second, the funding of highly leveraged financial intermediaries with short term liabilities increased throughout this period, which exposed those intermediaries to potential stress derived from changes in market liquidity conditions. As we all know, the originate and distribute model led to the fast development of securitization markets characterized by an ever-increasing supply of complex financial instruments. Given the course of events, these turned out to be quite difficult to value. On this last point, the rating agencies are involved, as they are responsible for assessing the credit quality of such instruments, which is an essential piece of information for investors. Nowadays, these institutions are also under public scrutiny regarding their capacity and incentives to correctly evaluate risk.
This change is deeply felt by financial services providers which saw decreased domestic and cross-border transactions, including a projected fall of about 20% in remittances in 2020. This pandemic has also compelled central banks to reconsider the robustness of their national payments systems, implement electronic cashless banking options, and safeguard against cyber threats. Recent developments in cross-border payments landscape In recent years, the scale and importance of cross-border payments have grown in line with the growth of cross-border economic activities, with an estimated global transaction value of USD136 trillion in 2018. However, there is wide recognition that cross-border payment services remain inefficient, as compared to domestic payments. The common challenges facing crossborder payments can be attributed to cost and speed, lack of transparency, and limited access: Reliance on multiple intermediaries and correspondent banking with varying levels of operational efficiency, local requirements and cut-off times effectively lead to longer processing time and incur higher cost; Lack of transparency in the traceability and visibility of payment status, primarily due to lack of standardized payment status notification process; and Limited access of cross-border payment services, often caused by time zone differences and mismatch in operating hours of intermediaries. Given these challenges, I believe that more innovative approaches are required to ensure that users can access safe and affordable cross-border payment channels. If banks are not providing these critical cross-border financial services, users may resort to less- or non-regulated channels.

1 See for instance Hasan et al (2013)Opens in a new window 2 Pay.UK Monthly UK Payment Statistics December 2021Opens in a new window 3 BIS Quarterly Review, December 2019.Opens in a new window 4 KPMG ‘UK fintech investment soars to $ billion in 2021 – up sevenfold from 2020’Opens in a new window 5 McKinsey Global Payments Report 2021Opens in a new window 6 RTGS Renewal Programme Proof of Concept: Supporting DLT Settlement Models 7 A blueprint for a new RTGS service for the United Kingdom 8 Bank of England: RTGS Renewal 9 BIS Innovation Hub LondonOpens in a new window 10 Global Payments: The Interactive EditionOpens in a new window 11 FSB (2021) Targets for addressing the four challenges of cross-border payments: Final reportOpens in a new  window  6/6  BIS central bankers' speeches