samchain/econo-pairs-v1 huggingface dataset:
Macroeconomic Outlook and Monetary Policy in Turkey Remarks by Murat Çetinkaya Governor Central Bank of the Republic of Turkey at J.P. Morgan Turkey Macro and Credit Conference London  9 February 2017  Dear Participants, My speech will try to elaborate on the recent macroeconomic outlook, monetary policy framework and the coordinated policy actions to support the fundamentals of the Turkish economy. 1. Macroeconomic Outlook Turkish economy was hit by concurrent shocks in recent years. Geopolitical tensions, global shocks, security related issues and a failed coup attempt have created significant policy challenges. Despite the intensity and size of the shocks in recent years, the growth rate has been quite robust until recently, outpacing emerging market average by a large margin (Figure 1). The resilience of growth in recent years can be attributed to factors such as prudent macroprudential policies reducing the sensitivity of economic activity to capital flow volatility, dynamic domestic market, market flexibility of exports, and the fall in energy prices. Figure 1. Growth Rates in Turkey and Emerging Economies (Percentage Change, Annual) 12 10 8 6 4 2 0 Developing Countries excluding China and India Turkey*  -2  12.16  09.16  06.16  03.16  12.15  09.15  06.15  03.15  12.14  09.14  06.14  03.14  12.13  09.13  06.13  03.13  12.12  09.12  06.12  03.12  -4  * Forecast for 2016 Q4.

In particular, the energy situation in Europe, the loss of purchasing power due to inflation, and tighter financing conditions are having a dampening effect. Inflation will remain elevated for the time being. However, the importance of temporary factors such as supply bottlenecks is likely to diminish over the medium term. The increasingly tighter monetary policy in many countries should also help inflation gradually return to more moderate levels. Our scenario for the global economy is subject to significant risks. For example, the energy situation could worsen again. At the same time, high inflation could become embedded and require stronger monetary policy responses abroad. Finally, the coronavirus pandemic continues to pose important downside risks to growth. Swiss economic outlook  In Switzerland, GDP growth in the second quarter was lower than expected, at 1.1%. This was mainly due to weaker performance in manufacturing. The short-term outlook has deteriorated. By contrast, the situation on the labour market has remained positive. The further development of the economy is likely to be shaped by the economic slowdown abroad and the availability of energy in Switzerland. To date, the prices of natural gas and electricity in particular have risen sharply. For this year, we anticipate GDP growth of around 2%. This is roughly half a percentage point lower than at the last monetary policy assessment. The level of uncertainty associated with the forecast remains high.
I commend the work of the Taskforce in tackling some of the most pressing and critical issues in this area - for example:   consideration of the challenges involved in moving towards green definitions that are recognised internationally - since a market-wide taxonomy is clearly an important foundational step necessary for other initiatives to take hold;    the work to develop green loan definitions and standardising key documentation which will be helpful in reducing barriers to issuance; and    the push to improve the risk analysis tools that are available to investors, banks and regulators. More broadly, in infrastructure financing, where the risks are often highest in the early stages of projects, there may also be lessons to be learnt from existing public-private partnerships and the use of risk sharing agreements. And there may be opportunities to encourage the ‘crowding in’ of private investment for green projects through the use of public sector money. These ideas and structures are not new but could help support the allocation of green finance to economies where the need is greatest. The City and the UK China Green Taskforce are well-placed to support such work. Coordination  Climate change is a global problem that is most effectively met with global solutions. Given this need for a co-ordinated response, a significant element of the Bank’s work has involved engaging with other financial regulators and central banks - both with our fellow regulators here in UK, and also internationally, to help raise awareness of climate-related issues.

6  All speeches are available online at www.bankofengland.co.uk/speeches  6  The PRA is a founding member of the Sustainable Insurance Forum, a network of around twenty insurance regulators from around the world who are sharing knowledge and best practice on how to consider climate risk in insurance supervision. The Bank, as many of you know, has also co-chaired since 2016 the G20 Green Finance Study Group on behalf of the United Kingdom, with our colleagues at People’s Bank of China. We continue to do so under Argentina’s Presidency, the group now being the G20’s Sustainable Finance Study Group. And most recently, the Bank has become a founding member of the Central Bank 7  and Supervisors Network for Greening the Financial System . Conclusion  We are part way through a transition in thinking where climate change is moving from being a social responsibility issue to being a core financial risk at the heart of how companies manage their business. It is these financial risks that create the link from climate change to the Bank of England’s mandate - given our core responsibilities to ensure the safety and soundness of banks and insurers and our responsibility to support a stable financial system. It’s clear to me that many different actors - companies, investors, financiers, climate scientists, governments, financial policy makers - have a part to play, given their mandates and specialisms, to support this transition in thinking.
Keynes said of sound bankers that they were ruined in a conventional way along with their fellows so that no-one could be blamed (Keynes (1932)). If Keynes was right, then asset managers may be a different breed. Yet even if the “fail” element of too-big-to-fail is a red-herring, the “big” is not. Distress at an asset manager may aggravate frictions in financial markets, in particular frictions in market liquidity. One example would be an asset fire-sale. This might arise if assets from a failing fund were offloaded at a pace and scale that caused indigestion in the underlying market (Office of Financial Research (2013), Hau and Lai (2012)). If so, asset prices would be driven south, possibly to well below their long-term or fundamental value. Put differently, illiquidity risk premia in those markets could be driven to sub-optimally high levels. This fire-sale friction might be fanned by the actions of investors or counterparties. Falling asset prices may be the prompt for withdrawal (in the case of open-ended funds) or sales (in the case of closed-end funds). In some respects, this would mimic a banking “run”, albeit operating through non-conventional channels (Chen et al (2010)). This could itself induce a further round of asset fire sales in an amplifying loop. The good news here is that, unlike in banking, history is not littered with examples of failing funds wreaking havoc in financial markets. The historical examples we have tend to be confined to small and isolated corners of the financial system.

(2014), “Incorporating Financial Stability Considerations into a Monetary Policy Framework”, http://www.federalreserve.gov/newsevents/speech/stein20140321a.htm Taleb, N. (2007), “The Black Swan: the Impact of the Highly Improbable”, New York: Random House. TheCityUK (2013), “Fund Management”, available at: http://www.thecityuk.com/research/ourwork/reports-list/fund-management-2013/ Zinna, G. (2014) “Price Pressures in the UK Index-Linked Gilt Market: An Empirical Investigation”, Bank of England mimeo. BIS central bankers’ speeches  15
Energy and food prices increased dramatically. This pushed up inflation to unexpected levels. At the same time, economic activity appeared to be declining – a decline that eventually became a severe economic downturn. If, in such a situation, the interest rate had been substantially increased in order to rapidly bring inflation back down to the target, the economic situation could have been undermined even more. However, as the Riksbank works with a flexible inflation target we can choose not to bring inflation back to the target as quickly as possible. This flexibility also gives us scope to stabilise the fluctuations in the real economy. How long it should take to return inflation to the target depends, among other things, on the type of shock that has occurred, the size of the shock and how long it can be expected to affect the economy. An almost obvious question in the exam papers on macroeconomics that I helped to set in the spring of 2008 was: What monetary policy can a central bank that conducts flexible inflation targeting be expected to pursue under the prevailing conditions and why? Full marks went to those who answered something like: "such a central bank can be expected to make relatively moderate interest rate increases and accept a level of inflation that exceeds the target in the short term but then falls back to the target". This was also by and large the monetary policy conducted by the Riksbank.

We have started new work to understand what the frictions are and how we can work with our central banking colleagues globally to push forward this agenda, to deliver prompt settlement in different currencies and empower private innovations in cross-border finance. Second, we will continue to champion the Legal Entity Identifier (LEI) as a globally recognised and unique identifier for all businesses. The global LEI system contributes to many financial stability objectives such as improved risk management in firms, better assessment of micro and macro prudential risks, facilitation of orderly resolution, and enables higher quality and accuracy of financial data overall. In addition to financial stability benefits, LEIs provide valuable data and support anti-money laundering and combating the financing of terrorism efforts. They could, if linked to portable credit files, improve access to the domestic and global financial system, support greater choice and competition for business finance. The LEI could also act as the unique identifier for a digital ID, which could help the two-step verification process required for a more secure system.
Lars Nyberg: Are hedge funds dangerous? Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at a meeting at Nordea and the CFA Society of Sweden, Stockholm, 24 November 2006. *  *  *  I shall begin by thanking you for the invitation to come here to Nordea and the CFA Society of Sweden to develop some thoughts on the usefulness and risks with hedge funds. After several years of strong growth, hedge funds are a hot topic among market agents and authorities. Although hedge funds’ percentage of the total capital managed is small, around five per cent, they account for a large part of the liquidity on certain markets. Many people express concern as to what effects hedge funds might have on financial stability and after the much-publicised collapse of the US hedge fund Amaranth in the autumn, the debate on regulation has gained new impetus. As you may perhaps know, Amaranth primarily traded various gas and energy derivatives. After summer 2005, Amaranth held gigantic positions in the gas market – they believed in a price increase. Between August and October 2005 the price of natural gas rose by 50 per cent, partly as a result of the severe hurricanes. The fund earned substantial amounts of money and the fund managers were also expecting this autumn to see high energy prices during the winter. They bought futures for November and March and sold (sold short) contracts for October and April. However, this year did not develop as expected.

Market-neutral strategies attempt, as I mentioned earlier, to exploit differences in the valuation of various securities, while trying to protect themselves against overall market risk. Directional strategies entail finding macroeconomic trends and trying to predict future market movements. Event-driven strategies aim to identify securities whose prices will be affected by specific corporate events, such as acquisitions, mergers and bankruptcies. Neither of the latter two investment strategies is thus hedged in Jones’ original sense. Many hedge funds describe themselves as "multi-strategy” – they combine different strategies over time to achieve the highest possible earnings. This also applied to Amaranth, but the fact was that half of the fund’s assets were invested in forward contracts for natural gas. Many hedge funds also use complex trade strategies, where they try to find discrepancies between different derivative prices or maturities and their theoretical values. The well-known hedge fund Long Term Capital Management (LTCM), which crashed in 1998, was this type of fund. Developments internationally and in Sweden Over the past ten years, hedge funds have grown considerably, both in terms of number and the amount of capital managed. Internationally, the capital managed has grown by almost 30 per cent a year since 1998. Today the hedge funds manage approximately USD 1,000 billion, corresponding to around 5 per cent of the total capital managed internationally, divided between 8,000 funds. Most hedge funds are relatively small, most have fewer than SEK 800 million in managed capital and almost half of them have less than SEK 200 million. However, there are exceptions.
In that regard, the recent announcement by the European Central Bank of its determination to conduct unlimited intervention in the sovereign secondary markets, provided effective conditionality is fulfilled, constitutes a significant step towards the normalisation of market conditions in the euro area. Yet, the return to a smoothly operating monetary union cannot be completely achieved by simply relying on ad-hoc reactions by policy-makers. Institutional arrangements must be reviewed in order to restore adequate incentives for domestic authorities to prevent the reemergence of destabilising imbalances and to ensure that any residual risks arising in specific jurisdictions that could affect the area as a whole would be addressed by integrated mechanisms operating at the euro area level. The recent changes introduced in the European Union to strengthen the requirements and the mechanism for the surveillance of domestic fiscal policies and structural reforms, together with the creation of the EFSF and the ESM – which we now know will be soon be launched – are good examples of the required institutional reforms. BIS central bankers’ speeches  1  At the same time, a specific source of risks for the smooth functioning of monetary union that needs to be addressed directly is the financial instability experienced in specific jurisdictions.

Fernando Restoy: Remarks on banking union Remarks by Mr Fernando Restoy, Deputy Governor of the Bank of Spain, at the round table “Systemic risk and securities markets”, II International Conference on Securities Markets, held by the Comisión Nacional del Mercado de Valores (CNMV), Madrid, 14 September 2012. *  *  *  Let me first thank the organisers for their kind invitation to participate in this event held by the CNMV, of which I was Vice-Chairman from 2008 until my recent appointment in the Banco de España. I also had the privilege to participate in the highly successful conference organised in 2011. A glance at the quality of the papers and speakers in the programme of this conference is sufficient to confirm that the organisers have succeeded in maintaining the high standards achieved last year. Our Chairman today, Oscar Arce, deserves much credit for that. I am sure that the CNMV’s new top management – who will be taking over in a few weeks – will continue to support this event, as the President Julio Segura and myself did the first two editions. The current financial crisis has shown up numerous deficiencies in the functioning of the global economic and financial system. Many of those deficiencies are the consequence of imperfect rules, policy mistakes and inappropriate conduct by private agents. Some of those deficiencies are the subject of an on-going policy debate and of regulatory reform which, with varying degrees of ambition, is taking place in different jurisdictions.
Unemployment is now at 5.1% – its lowest level since 2006. Job-to-job flows have picked up sharply and are nearly at pre-crisis levels and the vacancy to unemployment ratio – a measure of labour-market tightness – is at its highest level since 2005. But, some things have still not improved as we had hoped. Despite being stronger in the middle of 2015, pay growth has now fallen back to the 2% range – roughly its average since the crisis. And forward-looking surveys do not suggest any significant recovery in pay growth is around the corner. BIS central bankers’ speeches  3  Productivity growth similarly showed signs of picking up in the middle of 2015 but has dropped back to annual growth of around a quarter of a percentage point at the end of 2015. Unit labour costs have picked up a bit over the last year. The picture is not completely consistent across different measures but most measures are subdued or expected to fall in the near term. Meanwhile, risks from the rest of the world economy have shifted and increased. Boosted by monetary policy, the euro area has recovered over the past two years, albeit to low rates of growth. The stresses around Greece and its creditors have so far been managed. But the risk to the UK from a more severe hard landing in emerging markets has grown.

Emerging market economies now account for more than half of global GDP and they accounted for more than 95% of world economic growth between 2008Q1 and 2011Q4.4 They are now facing a set of inter-related challenges, including high and growing levels of debt to GDP, slowing economic growth, falls in commodity prices which has hit commodity exporters and a strong US dollar. The healing process How should we read this picture? Is it still slow healing, just slower and hit by more adverse events than we expected? Or, like our friend the frog, has the gradual nature of the drift down in prospects and the fact that the deflationary shock looks so clearly to have been externally generated lulled us into missing some more fundamental shift? Is the water around us much colder than we thought? I think there is still some mileage in the slow healing story to explain the drift down in UK growth and the failure of pay and productivity to recover. One cannot repair quickly the damage to the global economy from the worst international financial crisis for 80 years. Some, but not all, of the effects of the financial bust and deep recession have passed. But some have not. I want to look now at some of these effects and headwinds that may be holding us back. First, there are signs that there may still be some scarring effects in the labour market.
Consider the earlier example of a disaster-myopic writer of deep out-of-the-money put options on UK equities, priced using distributions drawn from the Golden Decade. Let’s say that, in June 2007, a fiveyear put had been written on the FTSE-100 with a strike price 40% below the prevailing market price. Today, that put would be at-the-money. Hedging that position would crystallise a loss roughly 60 times the income received from having written the option in the first place. 10 This example is far from hypothetical. These are essentially the same trades undertaken by a number of insurance companies and other investors ahead of crisis. In the go-go years, the insurance premia from them yielded a steady income stream. But when risk shifted, many insurers have suffered large-scale losses as premia have adjusted and investors have scrambled to hedge. The large US insurer AIG has so far suffered gross losses totalling over  10  Roughly half of that loss represents under-estimation of the distribution of returns back in 2007. BIS Review 18/2009  7  $ on CDS contracts alone. Losses by the monoline insurers have also totalled in excess of $ Second, the breakdown of these models had the consequence of turning risk into uncertainty, in the Knightian sense. 11 Once the models broke down, how were assets to be priced? Practitioners have a devil of a job pricing assets in the face of such uncertainty. So too do academics, though some attempts have been made.

Willem F Duisenberg: Presentation of the ECB’s Annual Report 2001 to the European Parliament Introductory statement by Dr Willem F Duisenberg, President of the European Central Bank, to the European Parliament, Strasbourg, 2 July 2002 *  *  *  Six months ago we witnessed a milestone in European history: the launch of “the euro, our money”, in its visible form. European citizens are now able to perceive - and benefit from - the tangible reality of the euro, and the rapid substitution of legacy currencies at the beginning of this year bears witness to the successful launch of the euro banknotes and coins. The year 2001 provided a particularly challenging environment for the monetary policy of the ECB. The worsening economic outlook was accompanied by short-term upward pressures on prices from various sources, which complicated the conduct of monetary policy. This task was made more difficult by the extreme uncertainty which followed the terrorist attacks in the United States on 11 September. As usual, the monetary policy response of the ECB to such a situation had to look beyond short-term developments, focusing on the risks to price stability over the medium term. From this perspective, we could see that medium-term inflationary pressures were in fact receding. The ECB took account of this by reducing interest rates four times in 2001, by a total of 150 basis points.