samchain/econo-pairs-v1 huggingface dataset:
Rodrigo Vergara: Chile – economic outlook Speech by Mr Rodrigo Vergara, Governor of the Central Bank of Chile, at seminars held during the Annual Meeting of the Inter American Development Bank, Montevideo, Uruguay, 12 March 2012. *  *  *  I thank Luis Oscar Herrera, Enrique Orellana and Tatiana Vargas for helpful comments. I would like to thank you for inviting me to present our views on Chile’s economic situation at this Conference. These last years have been particularly challenging for policymakers worldwide. Periodically we must make decisions in an uncertain environment, weighing the costs and risks of alternative scenarios. For this reason, we welcome opportunities for meetings and discussions such as this, as they allow us to communicate our views in greater detail, as well as to hear other opinions. A better understanding of our decisions strengthens the effectiveness of our policies. More than four years have elapsed since the onset of the financial crisis that triggered the Great Recession. Nonetheless, we are still handling its legacy, experiencing periodic episodes of financial stress that will likely continue for some time. The situation in the Eurozone is complex, due to the interaction among fiscal, financial and macroeconomic vulnerabilities. From a historical viewpoint, growth perspectives for developed countries are weak. The outlook for emerging economies is noticeably better, although we are witnessing a slowdown whose pace is difficult to assess, particularly for China.

But, whatever may be the reasons behind these failures, the challenge that we now face is as to how to manage risks optimally in this even more challenging environment, knowing that the opinions provided by the rating agencies may not be too accurate, after all. 5. Let me now highlight another couple of recent developments. One such development is the greater significance of the sovereign wealth funds in the context of the phenomenal rise in reserves in non-Western countries. In the midst of the recent sub prime crisis, these funds have injected significant amounts of long term funds to the large ailing institutions to resurrect them or to prevent them from continuing with poor financial health. In that sense, the sovereign funds have acted as an immensely useful stabilizing force during the financial crisis. However, the injection of such funds has been received with mixed feelings in the geo-political context. I would think the debate on this development is just beginning and it would be useful for all of us to carefully watch the movement of this issue in time to come. Another important development in reserve management is the extensive use of external fund managers. External fund managers are being increasingly engaged by central banks, as many central banks are yet to acquire the technical skills and competencies required to manage the new asset classes that are developing in these dynamic market conditions.
Further, non-standard measures – most recently, the Outright Monetary Transactions (OMTs) – have significantly contributed to an improved euro area financing environment, mainly stemming from an improvement in financial market sentiment and an alleviation of vulnerabilities affecting the supply of bank credit to firms and households. In addition, the OMTs announcement has helped to narrow sovereign spreads and to restore investor confidence. However, the ECB’s (non-standard) measures can only be temporary solutions. Most importantly, market participants have to continue their efforts to facilitate the transition to a less central-bank reliant, more market-based financial system, for which the ECB’s measures, as well as the recent progress concerning the Single Supervisory Mechanism, have hopefully laid the foundations. One market segment that suffered considerably during the financial crisis was the market for asset-backed securities (ABSs), the revival of which I consider essential for the provision of finance to the corporate sector. Given the restricted funding sources and elevated bank funding needs, a trend towards more disintermediation from larger corporate issuers has been observed in recent years, and this trend will most likely continue. By contrast, small and medium-sized enterprises (SMEs) are more dependent on their respective domestic banking sectors and are subject to tighter credit conditions than larger firms that have greater access to global financial markets. The question arises as to how these restrictions could be overcome. A reopening of the ABS market may be one way of enhancing funding conditions for SMEs.

The ECB also provided an opinion on the MiFID II proposal.5 As you know, the MiFID II proposal extends pre- and post-trade transparency requirements from equity instruments (MiFID I) to additional asset classes such as bonds, structured finance products, derivatives admitted to trading or traded on a regulated market, a multilateral trading facility or an organised trading facility and derivatives considered eligible for central clearing. The aim is to enhance price formation and to support the evaluation process of such instruments. The requirements cover pre-trade transparency – i.e. the provision of quotes and market depth to market participants ahead of a trade – and post-trade transparency – i.e. the timely publication of the prices and volumes upon trade execution. These mandatory transparency requirements represent a major change, especially for the fixed income market. For brevity, I will only address the issue of post-trade transparency. As we have known since the publication of the seminal work of the Austrian economist and philosopher Friedrich Hayek, prices reveal information that is dispersed among the numerous individual members of an economy. As a consequence, market outcomes are directly influenced by the time and degree to which prices and volumes are disclosed to the public. In reality, different markets are subject to different transparency regimes and disclosure requirements, which are a consequence of the existing heterogeneity among both financial assets and market participants.
Greater emphasis and clarity are needed as to the purposes and limits of public intervention, and the extent to which those interests warrant different degrees, modes, and timing of public and private sector involvement, depending on the particular country and circumstances. In this way all parties will be better placed to understand current developments and how the international community might react to future strains. The argument against standstills There are of course other points of view. I would note that some have suggested that perhaps we should go in a different direction, that we should seek to build time back in by calling a time out. In particular, it has been suggested that an early recourse to comprehensive payment standstills (suspensions of debt service perhaps amplified or reinforced by capital controls) would increase the manageability of crises and enhance predictability. My reading of the record convinces me that trying to freeze market processes would do the opposite. I would like to share with you my thinking on this point. •  The desire for certainty and control which seems to underlie standstill proposals is understandable, as it offers the promise of using less public money, and seemingly entails less risk that creditors will be bailed out for poor credit decisions. But the control and manageability that might result may be more seeming than real. •  For one, a perceived disposition to preemptively lock the door seems likely to send investors heading for the exits all that much sooner.

Of course at the Banque de France we are all the more impressed by the reactions and the demonstrations since we suffered a loss ourselves … … Bernard Maris, the economist and journalist, was one of your board members. C.N. Yes, it was a horrible shock for us. Bernard Maris was a man of culture and tolerance, a free spirit and he was murdered because of his ideas. It is a huge loss for all of us. Do you see any economic consequences from these attacks? C.N. I do not think they will have significant economic consequences. Before the attacks everybody was looking towards Greece. Could the elections of the 25th trigger a new round of crises in the euro area? C.N. In my view the risks of a crisis for the euro area are much lower than a few years ago. Greece has clearly taken a path of reforms and restoration of its competitiveness. It is in the interest of Greece to continue following that path and to benefit from an accelerated improvement in their recovery. The second point is that we have built many significant defences against the risk of crisis and destabilisation in Europe. What is the scope for a more lenient policy in Greece or even for debt restructuring? C.N. We all know that the debt level of Greece is very high. The programme of the Troika foresaw a decrease in the debt ratio in the years to come.
Paul Tucker: A perspective on recent monetary and financial system developments Speech by Mr Paul Tucker, Executive Director and Member of the Monetary Policy Committee of the Bank of England, at Merrill Lynch Conference “A perspective on recent monetary and financial system developments”, London, 26 April 2007. *  *  *  Global monetary and financial stability The past year or so has been marked by resilience in both the global economy and the international financial system. World growth has been robust. On average, headline inflation across the industrialised world has remained contained. Capital markets have, so far, weathered the gradual withdrawal of monetary accommodation in much of the G7, and also a series of specific disturbances, without destabilising spillovers. In short, the world has enjoyed a further period of monetary and financial stability. Against that background, banks and dealers have posted fairly remarkable profits, accumulating more capital resources; and the (risk-unadjusted) returns of the fund sector – and so probably for most of you here today – have been healthy. There are, for sure, wrinkles in this picture, including here in the UK. But overall it is probably not what most commentators would have expected given that oil prices have more than doubled over recent years. For financial markets, it has surely been important that such a large cost shock has not led to a pronounced rise in global inflation, dislodging medium-term inflation expectations, and so prompting industrialised country monetary authorities to slam on the brakes.

Thirdly, if we “no longer know where the risk is”, that implies that it has been dispersed beyond the regulated sector. One might think that was a Good Thing. To take an extreme scenario, if risks were widely and evenly distributed across savings institutions internationally, a very nasty shock causing a sharp fall in asset markets would not obviously destabilise the financial system. It would obviously have macroeconomic consequences, by depleting household wealth and raising the cost of capital for firms. Other things being equal, central banks could respond by adopting an easier path for interest rates than otherwise, in order to maintain aggregate demand broadly in line with aggregate supply, with the objective of keeping inflation in line with explicit or implicit targets. Although the original shock may be nasty, the response would be the routine use of the routine instrument: the price of central bank money. There is no question of a so-called Greenspan (or any other kind of) “put” here; the focus would be not asset prices, but the outlook for spending in the economy and so inflation. This is obviously rather different from a similarly nasty shock producing severe disorder in a banking system that was carrying unduly concentrated exposures of some kind. For a central banker, banks matter because their liabilities are used as money, they are at the centre of the payments system, and they carry an associated asset/liability maturity mismatch. 6 Banking system distress is therefore typically characterised by a liquidity run.
Once deposit interest rates began to vary with market rates, the demands for M1 and M2 - the primary guides to monetary policy - became unstable. So, by the early 1980s, the Fed had de-emphasized M1. And by the mid-1980s, M2 had met the same fate. In the 1990s, we continued to establish annual ranges for these aggregates, as we were required to do by law, but they played almost no role in our deliberations. The legal requirement to set ranges expired this year, and in late June we decided to stop setting ranges. This step was taken with some reluctance, because using interest rates as the main policy tool does pose well-known dangers. But in the absence of reliable monetary aggregates, the Fed has operated reasonably well in an environment of significant ongoing financial deregulation and sizable financial shocks. Let me give you some examples. In terms of deregulation, barriers to interstate banking were eliminated, and recently a new financial modernization law allowed depositories to expand into activities like insurance and investment banking. In terms of shocks, we dealt first with the so-called credit crunch in the late 1980s - which was due in part to the collapse of many savings and loans - then with the turmoil set off by the Asian currency crisis in 1997-98, and finally with the unexpected runup in equity values in the second half of 1990s.

Preventative mitigation is obviously very important, but having impact tolerance means acknowledging that disruptive events will happen, and that firms need to be able to recover within their set tolerance. I’m talking about planning for scenarios that are severe but plausible – we expect firms to be resilient against a wide range of scenarios, but not against Armageddon. I think it likely that the ordering of these impact tolerances between firms and the PRA will often be the opposite way round from capital. On capital, inserting the public interest means that as a general matter we will require firms to hold more capital than they would if left to their own devices – hence, a battleground. For operational resilience, a firm is likely to experience significant private costs – for instance, impact on their profits or damage to their brand – before their safety and soundness is at risk. The exception to this may be a subset of operations whose failure might pose a systemic risk to financial stability. But in most cases, I think interests are likely to be aligned – we all just need to get better at managing this set of risks, as some recent events have illustrated all too painfully. In this context, I will expand briefly on the PRA’s particular focus in this important area. Our general statutory objective is safety and soundness, with policyholder protection on the insurance side and a secondary objective to facilitate competition.
What will the default rate be once demand growth slows? What is the appropriate correlation rate in terms of the loss experience across the different subprime and Alt-A mortgage pools that should be used in assessing the value of collateralized debt obligations? How are such correlations likely to differ in the boom versus in the bust? This uncertainty means that policymakers can never be sure about the existence, size or persistence of an incipient asset bubble. As a result, this task of dealing proactively with bubbles will be very difficult! So what should the policymaker do? I think the first step is for the policymaker to work hard to investigate what is generating the sharp rise in prices for the asset in question. Sustained price increases are a symptom of changes in demand and supply. The policymaker needs to develop a perspective about whether these demand and supply changes are realistically sustainable to the extent implied by market prices. In particular, carefully analyzing the assumptions that underpin sustained increases in asset prices – which might be symptoms of a bubble – and considering the risk that these assumptions might be wrong is important. Also, looking carefully at the dynamics of the system on which the beliefs are based may be useful. In particular, are the dynamics of the system reinforcing or dampening? If the dynamics are reinforcing, then there is greater likelihood of an asset bubble.

A key question for the future is this: do notification and memo-posting suffice, so that funds actually move at discrete times in the day, as they do in the UK, or do funds need to move in near real time as well? 2  BIS central bankers’ speeches  In the near term, we in the Federal Reserve continue to work to reduce the time required to complete payments and deliver payments-related information in the channels in which the Fed operates. The debate to be had by the industry is whether our existing payments mechanisms can meet the needs of the future or we need to embark upon designing a next generation payment instrument. We welcome your voice in that debate. Let’s turn our focus to end-to-end efficiency in the payments system. Innovation is occurring in closer proximity to end-users, at points between payment providers and their customers, and between merchants and consumers. Enhancing efficiency will mean moving business-tobusiness (B2B) and person-to-person (P2P) payments from paper to electronics, and bringing down the end-to-end cost of initiating and receiving payments. Efforts will continue by Internet/Web vendors to create customer-facing technologies to help users initiate payments. Here’s where mobile and handheld innovations may play a large role. In what form, and when, growth occurs will depend on when alternatives offer the speed, convenience, simplicity and other advantages that drive broad adoption.
With the introduction of the Stock and Bond Connects, the cross-boundary infrastructure linkages between the clearing houses of the two markets have become the critical foundation on which cross-boundary transactions can be efficiently cleared and settled. The Central Moneymarkets Unit (CMU) operated by the HKMA is now linked to the Mainland central securities depositories (CSDs) on the one hand and the international CSDs (ICSDs) on the other. We have embarked on a multi-year enhancement programme to modernise the system to enable CMU to perform all functions required of an ICSD. Operating window will be expanded; a wider spectrum of corporate action services will be offered; and the system will enable the CMU to directly provide collateralised lending and FX services to nonbank participants. 19. Apart from these three factors, i.e. liquidity, product and infrastructure, which are essential to building a vibrant RMB offshore market in Hong Kong, I should add that supervisory collaboration is also important in this gradual opening-up process. Many of the initiatives to promote the international use of RMB will involve the opening up of the Mainland’s capital accounts. This must be done in a gradual and risk-controlled manner, which is why you often see quota and eligibility criteria in the initial stage of the Connect schemes. This kind of risk-control features requires the close collaboration between the HKMA and our Mainland counterparts. Through such collaboration, we seek to ensure that Hong Kong is a safe and reliable platform to take forward these new cross-boundary initiatives. 20.

I find relevant what Agustín Carstens, General Manager of the BIS, said in his lecture held at the London School of Economics in May 2019: “The textbook version of the inflation targeting framework, which prescribes pursuing inflation stability with floating exchange rates through adjustments of a short-term interest rate, is obviously too narrow for EME central banks. In particular, the financial channel of the exchange rate gives rise to difficult trade-offs for monetary policy, while at the same time complicating the conduct of monetary policy by weakening its transmission. EME central banks have risen to this challenge through their innovative use of additional policy instruments. They have turned to FX intervention to deal directly with the financial channel or insure against undesired exchange rate swings, and to other non-orthodox balance sheet policies as well as macroprudential tools to deal with specific imbalances or vulnerabilities in a targeted way.” Not only that I share his view, but I have to say that, in Romania, we started practicing what he speaks about now even before the outbreak of the global crisis. We resorted to forex interventions in order to mitigate the exchange rate volatility and we took prudential measures to contain excessive growth of credit (of forex lending in particular). The IMF mentioned the NBR as being among “the pioneers” of what was later referred to as “macroprudential instruments".
Even though changes in the krone exchange rate do not influence the GPFG’s international purchasing power, the fall in the fund’s value may have been perceived as less dramatic as a result. Equity markets have not always rebounded after a steep decline as rapidly as after the 2008 financial crisis. The chart shows developments in a global equity index in the period after the dotcom crash in 2000. From the peak in winter 2000 to the trough in winter 2003, equity prices plunged at the fastest pace since the early 1930s. Fluctuations in the krone exchange rate amplified the fall in the GPFG’s value measured in NOK. The value of the GPFG at the beginning of 2003 was 30 percent lower than assumed in the National Budget for 2002. Investors buying equities in Japan’s equity market at the end of 1989 experienced even more dramatic developments. The market fell and stayed there. The value of the shares traded on the Tokyo Stock Exchange is still no higher than the 1989 levels. From being the largest in the world in 1990, accounting for almost 40 percent of global market capitalisation, Japan’s equity market now accounts for less than ten percent. However, it is important to remember that these developments apply to only one country. Global equity markets in general have shown completely different developments since 1989. 2/6  BIS central bankers' speeches  What can we learn from these crises? The first lesson is that crises will occur.

Arnór Sighvatsson: The logic behind the capital account liberalisation strategy Speech by Mr Arnór Sighvatsson, Deputy Governor of the Central Bank of Iceland, at a meeting of the Iceland Chamber of Commerce, Reykjavík, 15 December 2011. *  *  *  Ladies and gentlemen On 25 March 2011, the Central Bank published a capital account liberalisation strategy allowing for removal of the capital controls in two phases. Phase I would focus on channelling unstable króna assets, particularly those held by non-residents, into the hands of investors willing to take a long-term exposure on the króna. In Phase II, other controls would be lifted. The strategy is relatively terse as regards Phase II, as a number of things could change before it can be launched. As a consequence, Phase II will be drafted in greater detail at a later stage. Therefore, in my presentation today, I will focus on Phase I and attempt to explain why the individual steps within it are being taken in the order specified in the strategy. The main problem the strategy is attempting to solve is lack of confidence: in the domestic economy, the currency, and the Government’s capacity to service its debt. Confidence between individuals and between firms, domestic and foreign alike, is a precious commodity whose true value is only realised when lost. The reason confidence plays such a vital role in the mechanics of the economy is that each party’s confidence depends on the confidence of all the others.