samchain/econo-pairs-v1 huggingface dataset:
Durmuş Yılmaz: Global crisis, restructuring and national transformation Speech by Mr Durmuş Yılmaz, Governor of the Central Bank of the Republic of Turkey, at the Forum Istanbul, Istanbul, 20 May 2010. *  *  *  His Excellency Deputy Prime Minister Babacan, Distinguished Guests, At the outset, I would like to thank Mr. Canevi for his kind invitation. It is a great pleasure for me to participate in this conference where we will discuss the future of Turkey in a global context. I will start my talk with a brief review of imbalances in the global economy, which have ultimately led to the recent global crisis. Then I will discuss the evolution of the main mandates of central banks from a historical perspective. Finally, I will conclude my speech with some remarks on the future of central banking in the post crisis period. Dear Participants, Any elaboration on a new global story must start with an understanding of the roots of the current crisis. I believe it would be appropriate to analyze these factors under three headings. The first one is the global macroeconomic imbalances. In the pre-crisis period, the consumption in the US and several advanced economies was excessively high, which was matched by high savings rate in the South East Asia (due to capital controls and downward pressure on wages) and also in oil rich countries (due to low public investment on infrastructure).

Thanks to financial engineering and innovative products, only a small portion of financial institutions’ assets is in government securities. Therefore, asking for government securities as collateral in open market operations would no longer provide enough liquidity to the financial system. In the meantime, as banks have lost their dominance in the financial system, corporations and non-bank financial institutions have joined the conventional banks as the counter parties of central banks in market transactions. The question in this context is (1) whether the innovative policies we have seen in the last year will lead to longer-term changes in central banking doctrine and behavior, (2) whether in parallel to new developments in financial structure central banks will adopt a more flexible approach in operational practices, and (3) maybe more importantly whether central banks will maintain their influence in the financial markets, which has grown rapidly due to extraordinary actions during current crisis? These are important questions to discuss and I hope this conference would provide new insights to policy makers as we sail through uncharted waters. While concluding my remarks, I would like to extend my thanks to the members of the Forum Istanbul, who have contributed to the constitution of constructive criticism environment that I perceive as an important element in building the future of Turkey. Thank you for your attention. 4  BIS Review 73/2010
Jacqueline Loh: Strengthening Asia's bond markets Keynote address by Ms Jacqueline Loh, Deputy Managing Director of the Monetary Authority of Singapore, at the Asia Securities Industry & Financial Markets Association's Annual Conference, Singapore, 17 November 2016. * * * Andrew Ng – Chairman, ASIFMA Mark Austen – CEO, ASIFMA Greg Medcraft – Chairman, Australian Securities and Investments Commission, and my fellow keynote speaker Fellow regulators and central bankers Distinguished guests Ladies and gentlemen 1  It is my pleasure to join you this afternoon at the 10th ASIFMA Annual Conference. 2 When I last spoke here two years ago, the global economy was confronted by what the IMF described as “legacies, clouds and uncertainties”, and was forecast to grow at just 3.3%1. Two years on, in 2016, the IMF has lowered its forecast for the current year further to 3.1%, reflecting a more subdued outlook for advanced economies, before recovering to 3.4% in 20172. This is below the immediate pre-GFC average of 4.2% over 1998–2007, though more aligned with its long-term average of 3.1% over 1980–1998. 3 The medium-term growth story for Asia is bright. The IMF’s outlook for the next five years is for emerging and developing Asia to grow by a robust 6.3%, well above the forecast for the US (1.9%), Europe (1.5%) and Japan (0.5%), and will underpin the higher investment returns in this part of the world. 4 Asia’s bond markets have softened in recent years but has much potential alongside its relatively strong economic growth outlook.

(2021) estimates that $ of the $ of economic damage caused by Hurricane Sandy (New York, 2012) was attributable to climate change driven rises in sea-levels 7 See Chapter 6 of IMF Global Financial Stability Report 2020Opens in a new window 8 The Stern Review on the Economics of Climate ChangeOpens in a new window (2006) 9 4/5  BIS central bankers' speeches  9 See Government announcement of climate considerations being embedded across UK principal financial  regulatorsOpens in a new window 10 Dietrich, Müller, and Schoenle (2021) – ‘The Expectations Channel of Climate Change: Implications for Monetary  Policy’ 11 Monetary policy in the intangible economy - speech by Jonathan Haskel, University of Nottingham, February  2020 12 See ‘It’s not easy being green – but that shouldn’t stop us: how central banks can use their monetary policy  portfolios to support orderly transition to net zero’ speech by Andrew Hauser and Options for greening the Bank of England’s Corporate Bond Purchase Scheme discussion paper  5/5  BIS central bankers' speeches
Getting back to the credit expansion in the household sector, the development we see in Sweden today is not unique. The American economy has been the subject of much recent discussion. A growing number of voices have warned that the risks have been built up into something of a financial bubble. The apprehensions derive from highly inflated asset values, low saving and increased indebtedness, i.e. in principle, a similar situation to the one we currently have in Sweden. Total lending by American banks increased in March by 10.1% compared with March 1999 and lending in relation to GDP is currently at a historically high level. The lending statistics show that the primary increase is in lending 2  For example, a 5-year government bond. 3  BIS Review 50/2000  for housing, due to rising property prices. At the same time as lending is increasing, saving is declining. Over the last five years, saving as a proportion of disposable income has fallen by nearly 5 percentage points and amounted to a low 2% during the last quarter of 1999. Sweden has shown a similar development. During the last five years, the saving ratio has fallen by over 9 percentage points and is currently at 2%. There are thus several signs of a development that is worrying from the view of financial stability. The rising debt ratio has without a doubt made households more vulnerable. However, as in Sweden, employment and households’ financial assets have increased, which favours the households’ ability to pay.

Since the financial markets operate across national borders, the Riksbank works together closely with foreign central banks on these issues. For example, the Riksbank participates in several ECB committees related to stability issues and takes an active part in the ongoing work to reform the capital adequacy regulations. It is also stipulated in law that one of the primary functions of the Riksbank is to promote a stable and efficient payment system. In order to fulfil this task, the Riksbank must closely follow developments in those financial institutions that are of central importance to the payment system, i.e. primarily the four major banks, which are each sufficiently large to cause problems for financial stability if they fail. The analysis focuses on three main areas. The first area concerns general developments in the banking sector - how the competitiveness and long-term profitability of the banks are developing. The second area examines credit risks related to the banks’ lending to households and non-financial companies. 1  BIS Review 50/2000  The third area that is analysed is counterparty and settlement risks that arise in connection with the banks’ trading and taking positions in the financial markets. The analysis is undertaken on an ongoing basis and is presented in the Financial Stability Report, which is issued twice a year. I will mainly focus on the analysis of the banks’ credit risks associated with lending to households and companies. This is a subject that has attracted growing attention as lending, especially to the household sector, has risen significantly.
This was a fundamentally different approach to that taken in QE, where the goal was to achieve the MPC’s stock targets. As a consequence, our eventual total purchases were far lower than some early estimates – and that, combined with the short holding period, very clearly differentiated the LDI operations from the much larger and more persistent path of QE holdings (Figure 4). Page 11  Judged against the criteria we set ourselves, these operations were highly successful, a view supported by most market participants and commentators. But there were many important learning points for us, and for anyone contemplating such operations in the future too. The first is simply to underscore the value of effective preparation across every element of design. As I mentioned at the start, we had benefited substantially from the thinking of the BIS working group in the months ahead of the LDI crisis. Establishing and communicating a rigorous approach to governance is critical. Ensuring your operations genuinely are temporary is a vital but high stakes decision: make sure your deadlines are credible and clearly communicated. Most importantly of all, invest heavily in how you want to price your facility. The standard MMLR theory of operating at a spread wider than in normal market conditions but narrower than in stressed conditions is nice in theory.

1) The changing nature of systemic liquidity risk Stripped of its superficial idiosyncrasies, the LDI episode provides an almost canonical example of the structural trends we identified in our BIS work: First, the growing use of LDI[6] increased the exposure of real people, in this case current and prospective UK pensioners, to developments in gilt markets. Second, key features of LDI funds left them, and their Defined Benefit (DB) pension scheme investors, exposed to very substantial liquidity risks in the event of a sharp change in interest rates. Those features were: large leveraged holdings of longer-duration gilts or interest rate derivatives; liquidity buffers for meeting margin or collateral calls that had not been rigorously stress tested for more severe shocks; and an overly cumbersome recapitalisation process that left DB schemes unable to inject resources quickly enough into their LDI funds, even where they had the means to do so. Third, in such circumstances, the LDIs’ business model was reliant on being able to liquidate their gilt holdings in size, and at stable well-defined prices. In markets where there was limited intermediation capacity and few if any other marginal buyers, that proved impossible. Expressed like this, and abstracting from the very different initial trigger, these features bear a striking resemblance to the 2020 dash for cash. A wide range of non-bank players with leveraged positions and thin liquidity buffers all rushed simultaneously to get out of positions in normallyliquid financial instruments in order to raise funds for margin calls and other liquidity needs.
There is however more to the story than that. In the period between the early 1990s and the onset of the crisis, there was a remarkable and unprecedented evolution of the financial system which involved a major expansion of activity. Banks moved from a traditional model of taking deposits and lending them out, to a model that involved far more the origination and distribution of loans – often known often as securitisation, in which these loans were substantially distributed to shadow banks. These shadow banks thereby took on more of the traditional core bank functions of credit assessment and maturity transformation (the practice  1  The Financial Stability Board has defined ‘shadow banking’, as credit creation occurring partly or wholly outside the banking system. In this lecture, I use the term ‘shadow banks’ in the looser sense of those entities in the non-bank financial system that might pose systemic risks in any form, collectively or individually. BIS central bankers’ speeches  1  of borrowing at shorter maturities than the maturities of the assets they held). And, they did so, like the banks, with weak levels of capital. But, it would be a mistake to portray shadow banks as bad. There is good evidence that in the twenty years before the crisis they emerged as a stabilising force (most notably in the US) because they were able to expand their provision of credit at times when traditional bank lending underwent cyclical contractions (Meeks et al 2014).

When in 2003 we clarified our objective to keep inflation below but close to 2%, we assumed an equilibrium real interest rate of 2% on average. 9 The probability of hitting the effective lower bound under this assumption was very low. Today, imperfect indicators of the equilibrium real rate, such as real forward rates at long horizons, suggest that it may have fallen to much lower levels. In this context, higher potential growth would facilitate the stabilisation task of monetary policy by allowing the equilibrium real rate to rise. The untapped potential of the euro area For all these reasons, structural reforms that reverse the downward drift in potential growth are now vital for the euro area, which is why I believe, as the guardian of the currency, we have a legitimate interest in talking about them. But we should recognise that our weak longterm performance also provides an opportunity. Since many economies are distant from the frontier of best practice in at least some policy areas, the gains from structural reforms are easier to achieve and the potential magnitude of such gains is greater. To give just one example, research by the OECD suggests that committed convergence towards best practice across labour and product markets, tax policy and pensions would  8  Arulampalam, W., P. Gregg, and M. Gregory (2001), “Unemployment Scarring.” The Economic Journal, vol. 111, November 2001. 9  Coenen, G. (2003), “Zero lower bound: is it a problem in the euro area?” ECB Working Paper Series No. 269, September 2003.
At the end of the day, out of turmoil, we all come out with new ideas, new concepts and new lessons to be learned and followed. Or, to be more illuminating let me quote Christopher Adam and David Vines – Oxford University: “… The Great Depression led Keynes to write his General Theory, thereby creating macroeconomics as a basis for national macroeconomic policy-making. The Second World War led – via the Bretton Woods Conference – to the creation of international macroeconomics, and to the birth of the IMF… The present global financial crisis will, we think, most likely lead to a major shift in our understanding of the role of finance in macroeconomics, in both theory and in policy-making”. The recent global economic and financial crisis indeed created a room for upgrade of what we knew or what we thought we knew. It clearly illustrated how fragile our knowledge can be emphasizing the need for a continuous capacity building. Bearing all these in mind, one cannot be oblivious to the role which the training centers, such as the CEF, do have in building the architecture of knowledge. In fact, the global crisis accentuated even more their importance. They embrace and combine the latest theoretical and practical views, trying to spread the new ideas and help policymakers deliver optimal policy responses. The CEF has proved to be a leading institution in helping policy makers to improve institutional capacities.

Those small countries in particular had to accept the new economic reality of lower demand, higher unemployment and forced fiscal consolidation due to a fall in tax income or borrowing difficulties. The other group consists of bigger or more closed economies that were relying on domestic demand. They were able to smooth the initial impact of the crisis with more extensive government support measures. There was also the expectation that the crisis would be temporary. With the benefit of hindsight we know that we were not facing a temporary bump on the road, but a more fundamental need for adjustment. The initial smoothing of the shock may have been even more costly as it resulted in a higher level of public debt. Secondly, the required policy adjustment involves a dimension which we now consider critical: the speed of reacting and the decisiveness of policy actions. The Baltic countries have learned it firsthand through their experience, which of course is the hard way. There are few economists today that would fundamentally question the need for fiscal consolidation and structural reforms in Europe, as the crisis has clearly turned out not to be temporary. However, we all know it is politically difficult to cut government spending and implement reforms fast. The natural tendency for most politicians is to favour gradual adjustment. “Gradualists” say that in case of fast changes the risk of possible policy mistakes is higher, leading to losses in physical and human capital. Opponents of that view, including myself, certainly acknowledge those risks.
  Hours worked, closely tied to overall economic activity, and personal income excluding transfers (Charts 4–5) illustrate both the depth of the economic decline and the highly unusual nature of the recovery so far compared with all others in the post-World War II period.   The unemployment rate has declined, but to a large extent this reflects the decline of the labor force participation rate (Chart 6). Ranges of estimates of unemployment including discouraged workers run as high as the high teens.   Had the participation rate remained at its business cycle peak level, the unemployment rate would be about 10.5 percent.   Core inflation (excluding energy and food prices) has declined to a very low level, well below the range of 1 percent to 2 percent that market participants have associated with the Fed’s desired, “mandate consistent” range. Low rates of core inflation are of concern because economic research suggests that this is an important indicator of long-term trend headline inflation (Chart 7).   Economic history also suggests that recoveries from financial crisis and recession are fragile. Indeed, one disappointment in 2010 was that an initially strong recovery weakened considerably in the second quarter, in part due to renewed concerns about financial fragility in the wake of the sovereign debt concerns in parts of Europe. The recovery remained restrained, eventually prompting the Federal Reserve in November to embark on a second round of large-scale asset purchases, often called quantitative easing.

The federal fiscal stimulus sustained state and local governments through the severe revenue drops triggered by the recession. With the ebbing of the fiscal stimulus program, many state governments are taking actions to make long-term structural reductions in spending.   Federal fiscal policy is widely acknowledged to be on an unsustainable path for the long term and must be addressed (Chart 33). For example, the expiration of the Bush-era income tax cuts and legislated cuts in Medicaid, if they went into effect, would stabilize the debt to GDP ratio at around 80 percent; if, however, their effective date continued to be deferred, the debt to GDP ratio could move toward 100 percent fairly rapidly. The proposed budget delivered by the U.S. Administration on February 14 begins the process of adjusting the fiscal trajectory. Fifth, the challenge for monetary policy has been to provide stimulus and support in the wake of the combined financial crisis and recession. As noted at the outset, economic history suggests that such a combined financial and economic shock can drive the economy down very deeply. Strong, forceful policy – both monetary and fiscal – is necessary to stem the contractionary forces in the economy. The Federal Reserve responded by lowering interest rates to near zero, to provide substantial liquidity support to the economy and to conduct the first large-scale asset purchase program, more than doubling the Federal Reserve’s balance sheet. History also suggests that the recovery from a combined financial and economic shock can be fragile.
Monetary policy should in retrospect be evaluated on the basis of whether it has contributed to countering deflationary tendencies. In such a situation, as well, there may be reason for Norges Bank to notify the government authorities that measures other than those available to the central bank are necessary. The evaluation criteria I have outlined are summarised in the matrix in Chart 14. At the beginning of 1999, the krone was weak, interest rates were high and there was a considerable risk of a recession of the type that would further reduce confidence in the krone. We could thus easily have ended up in a situation that is represented by the box in the upper left-hand corner of the matrix. Norges Bank decided to reduce interest rates in order to stimulate the economy. As I mentioned earlier, the krone  BIS Review 7/2001  11  appreciated when interest rates were reduced, indicating that the decision resulted in increased confidence in the krone. Following the interest rate reductions in 1999, the krone exchange rate against the euro was approximately at its initial range, while price inflation was approximately on a par with the level aimed at by the ECB. We were thus in the situation represented by the box in the middle of the matrix. During the autumn of 1999 and spring of 2000, however, there was growing evidence that the growth pause in the Norwegian economy would be shorter than assumed, and it appeared that price and cost inflation was picking up.

Following the next decision to increase interest rates by 0.25 percentage point on 20 September, we indicated that the probability that the next change in interest rates would be a reduction was the same as the probability of an increase. The sight deposit rate has since remained at 7.00 per cent. In the December 2000 Inflation Report, it was estimated that price inflation would decline gradually in the years ahead, but remain higher than 2 per cent in 2003 and 2004. However, the projections were based on the assumption that interest rates move in line with market expectations, as implied by the forward rate curve. The market had factored in a decline in interest rates over the next two years. It thus appeared that market participants had a different perception of the probability of a reduction in interest rates than the one expressed by Norges Bank. The technical assumption of a fall in interest rates influenced the projections. In the report, we also indicated that given an unchanged interest rate, projected price inflation would be below 2 per cent from the end of 2002. Has monetary policy been successful? It is not possible to find a simple performance measure that makes it easy to determine in retrospect whether monetary policy has been successful. As noted earlier, confidence and credibility are important for achieving the objectives of monetary policy. The degree of confidence and credibility will be an indication of how successful monetary policy has been. Confidence and credibility cannot be measured directly.