samchain/econo-pairs-v1 huggingface dataset:
BIS central bankers’ speeches  5  multiyear contracts is a multiyear nominal stability. A policy that “lets bygones be bygones” from year to year may not achieve this kind of stability, especially when policy options can become constrained, in the short term, by the zero bound. A policy that takes a longer-term perspective and is properly communicated and executed – so as to instill confidence that monetary policy will hew to a 2 percent inflation target rather than fixate on the run-rate of the past four quarters or the outlook for the next four – may better supply the longer-term comfort that households and businesses need to plan and budget. Such a policy would reduce the uncertainty that monetary policy as it is currently conducted spawns and would be more effective in doing its part to assist in economic expansion.8 A dime between two nickels I hope this is enough to get a conversation started. I will now turn the microphone over to John Taylor. In doing so, I am reminded of Ross Perot’s quip when he was placed between Bill Clinton and George H.W. Bush for a predebate photograph in the 1992 presidential election. Noting that Mr. Perot was substantially shorter than the other two men, a reporter asked him how he felt. His reply: “I feel like a dime between two nickels.” In contrast, compared to John Taylor, I feel like an intellectual dwarf – a mere penny sitting on the dais next to John’s $ bill brain.

Bigger and broader banking does not obviously appear to have been better, at least in a risk sense. In banking, as on many things, Merton may have had it right. (b)  Robustness  The Merton result holds in a world in which investors form judgements based on knowledge of the distribution of risk. But in complex dynamic systems, the distribution of risk may be lumpy and non-linear, subject to tipping points and discontinuities. 21 Faced with this, the distribution of outcomes for the financial system as a whole may well be incalculable. The financial system may operate in an environment of uncertainty, in the Knightian sense, as distinct from risk. There is a literature on how best to regulate systems in the face of such Knightian uncertainty. 22 It suggests some guideposts for regulation of financial systems. First, keep it simple. Complex control of a complex system is a recipe for confusion at best, catastrophe at  18  Beale et al (2009). 19  A Herfindahl-Hirschman index of revenue concentration is constructed to measure diversification, with a measure of zero meaning that the HHI = 1, i.e. revenue is concentrated solely on one activity. Revenue concentration is calculated across three buckets for the last pre crisis year (2006) – Retail and commercial banking; Corporate and investment banking; Asset and wealth management. 20  De Nicolo (2000). 21  Haldane (2009b). 22  See, for example, Aikman et al (2010). 8  BIS Review 40/2010  worst.
It was rather their economic applications and how they spread - thereby altering patterns of production and consumption - that determined the magnitude of their impact on long-term growth. Bringing about such a development involves ensuring that it is supported by the ways in which various parts of our society function. Economists talk of society’s institutions or a market economy’s infrastructure. This refers to everything from the structure of government and the degree of economic stability to how the judicial system functions, with 2 ownership playing a major role, the quality of education and the structure of taxation. As I said, a major cause of Sweden’s earlier difficulties in utilising steam-engines was that various social systems were not able to latch onto the new technology and use it productively. Sweden simply lacked the conditions for this initially. A historical view of transformation and development One of several possible approaches to an analysis of economic developments connected with various industrial revolutions was put forward by the Austrian economist Joseph Schumpeter in his theory of development clusters and long cycles. This approach has been developed in Sweden by economists and economic historians such as Erik Dahmén, Johan Åkerman, Lars Magnusson and Lennart 3 Schön. Changes in technology are often cited as a basic cause of the long cycles. Technical innovations tend to be developed in clusters that play a central part in the transformation of manufacturing.

Economic policy must increasingly reflect the capacity constraints facing many Norwegian businesses. There are prospects that the interest rate will be raised gradually – in small, not too frequent steps – towards a more normal level. Thank you for allowing me to make the introductory statement at this hearing. 4  BIS Review 44/2006
For Ronald Coase and Douglas North, institutions helped solve information and co-ordination problems within organisations, communities and societies (Coase (1960), North (1981)). The more complex these information problems, the more important were institutions as staging posts to efficiency and progress. For Mancur Olson, institutions could be a bulwark against the power of vested interests (Olson (1982)). Vocal minorities could block reform which would otherwise benefit the silent majority – for example, through tougher anti-trust law and tighter regulation. Institutions, arms-length from these vested interests, could break that reform logjam and thereby act as a growth facilitator. A common denominator among all of these thinkers, from Smith to Veblen to Coase to North, is that institutions rise in importance as societies become more complex, integrated and information-rich. Indeed, by embedding knowledge from the past, and investing in public goods for the future, institutions were essential prerequisites for continuing progress in such systems. Recently, those basic insights have been corroborated by historical evidence. Institutional quality has been found to be a key determinant of economic growth, particularly during financial liberalisation (Kose et al. (2006)). For Acemoglu and Robinson (2012), institutions play the pivotal role in explaining “Why Nations Fail”. In an echo of Olson, they distinguish extractive (catering for an elite) and inclusive (catering for society) regimes, with the first a recipe for economic regress, the latter for progress. Whether old or new, institutions seem to matter. Their secret lies in solving societal problems of knowledge, co-ordination and incentives.

Looking ahead, the stock of information is forecast to double over the next 3 years (Cukier and Mayer-Schoenberger (2013)). On these trends, by 2020 the stock of information will have risen 150-fold since the turn of the century2 At that stage, the information created this century will account for over 99% of  1  A bit is a 0 or a 1. A byte is 8 bits. An exabyte is 10 or a quintillion bytes. 2  18  www.economist.com/node/15557443. BIS central bankers’ speeches  1  that ever created. That CD pile will stretch to the moon and back more than 10 times. Each person alive will have nearly 1500 times more information than was housed in Alexandria.3 These remarkable trends in global integration have delivered significant benefits to global wealth and welfare, providing a large boost to growth (Kose et al. (2006), World Bank (2008)). There is also now decisive evidence of the IT revolution having materially boosted economy-wide productivity (Jorgenson et al. (2008)). As more of the economy has become virtual and global, and less physical and local, it is possible that existing national income methods may, if anything, have understated these gains (Arthur (2009)). Yet, as recent events attest, rapidly rising integration and information are not costless. They can reshape and rescale the risks facing social, economic and financial systems.
Now, in addition to continuing to explore such monetary policy tools, policy makers would have to elaborate on the uses of regulatory rules for limiting the risks threatening financial stability and designing the optimal institutional structure for that purpose that finds the perfect balance between the risk of losing central bank independence and the risk of creating coordination problems (between the central bank and the regulatory and supervisory agency). Financial stability in Turkey and the monetary policy In the second part of my speech, let me turn to financial stability in Turkey and the monetary policy we have started to implement in the aftermath of the global financial crisis. Turkey used to be among emerging economies with high volatility and particularly sensitive to global risk perceptions throughout the 1990s and early 2000s. However, this time the headwinds from the global crisis has remained relatively subdued thanks to the resilience of the financial system and prudent macro policies. Of course, the growth rate of the economy has dropped sharply, but neither price nor financial stability has been seriously jeopardized. In fact, Turkey was one of the few emerging countries that ended up with higher credit rating than pre-crisis level. A combination of several factors made the difference, but lack of excessive borrowing turned out to be the key.

Unlike its peers, the leverage ratios in Turkey stayed at moderate levels  BIS central bankers’ speeches  3  during the period of excess global liquidity, thanks to prudent policies of the Banking Regulatory and Supervision Agency and the Central Bank of Turkey. In fact most of those policies implemented in Turkey since 2002 are incorporated into the Basel III principles, such as countercyclical buffers (banks in Turkey are not permitted to expand unless their ratio is at least four percentage points above the legal minimum) and liquidity ratios (both in local and foreign currency). Debt level of the public sector was also reduced significantly thanks to a quite ambitious fiscal discipline. The real strength of the economy, however, came from the management of foreign exchange risks, which is the most critical aspect of a small, open economy. Thanks to prudent regulations and oversight, the overall FX position of the Turkish banking sector was balanced. Households carried a long position in FX, limiting their exposure to curreny shocks. Although the corporate sector carried a significant FX position, their debt was mainly in long term. All these factors contributed to the resilience of the Turkish economy to the global crisis, which in turn provided ample space to the Central Bank of Turkey to implement front-loaded and aggressive monetary easing without compromising price stability objective. No rescue package was needed to support the banking system. Thus, the government was able to enact modest but still quite effective counter-cyclical fiscal policies in the midst of global turmoil.
12  BIS central bankers’ speeches  systemically-important institutions as well as new guidelines as to how these institutions can be liquidated in an orderly manner in the event of a solvency crisis. One also looks in particular at how OTC trading in derivatives will be conducted and how the financial operations outside of the traditional banking sector – the so-called shadow banking sector – shall be supervised and regulated. A lot of effort has also been put into creating an organisation that enables the discovery and management of risks in the financial system that could affect several countries at the same time. In January 2011, the European Systemic Risk Board (ESRB) was formed, with the task of identifying threats to financial stability within the EU and of issuing warnings and recommendations to individual countries about such systemic risks. The ESRB cooperation has also included developing models to assess systemic risks and also macroprudential policy tools to counteract these risks. Moreover, the earlier European financial supervisory committees have now received the status of public authorities and been given the task of developing technical standards and guidelines in a large number of areas. They shall also play a mediating role, if member states are unable to reach agreement with regard to financial supervision. Recently, important steps have also been taken within the euro area towards the so-called banking union, with the European Central Bank (ECB) as joint financial supervisor for all banks in the member countries.

The HKMA BIS central bankers’ speeches  3  takes the view that an overseas bank that wishes to undertake retail business in Hong Kong should operate in the form of a locally incorporated subsidiary. This is to offer appropriate protection to the retail depositors in Hong Kong and to do that the HKMA needs to have an effective supervisory handle on every aspect of a retail bank’s operation, especially its capital adequacy ratio. We cannot achieve this if the bank operates as a branch in Hong Kong. 17. However, we also recognise that subsidiaries may not necessarily be an efficient model of operation if an overseas bank intends to undertake only corporate or private banking in Hong Kong. For example, a branch can leverage on the capital of the entire bank to finance a loan for a large corporate, which would otherwise be impossible if it operated as a subsidiary with rather limited capital in Hong Kong. Likewise, some private banking clients may prefer to deal with or book their investments with a branch of an overseas private bank rather than a subsidiary of that bank. So the HKMA keeps an open mind on whether an overseas bank operating in Hong Kong should take the form of a subsidiary or a branch. It all depends on the business model of the bank concerned.
A diversified portfolio of loans and investments limits expected losses. Losses on one project may be more than offset by gains on another. Economic growth is cyclical. During an upswing most projects fare better than expected. A deep recession can lead to heavy losses, insolvency and financial crisis. Banks may address this risk by building up sufficient buffers during upturns. Often, this is not done in practice. Instead, financial enterprises tend to place special emphasis on increasing market shares while times are good and allow their capital ratios to fall. It is during an upturn that the basis for the downturn is laid. Financial crises are often characterised by a first phase when optimism predominates, risk assessments weaken and the willingness to borrow and asset prices increase. When negative news starts to spread, investments fall short of expectations and the mood shifts, asset prices fall and debt-servicing problems accumulate. A financial bubble can first be identified with certainty after it has burst. There are a growing number of examples of this. After the Asian crisis, which started in 1997, and gradually had global spillover effects, there have been national financial crises in Turkey and Argentina. During much of the 1990s, the US experienced extensive restructuring and high economic growth. The gap between the US and the rest of the world widened. Investment expanded sharply, particularly in the technology sector. This was made possible by dynamic credit and capital markets. Developments led to a broad expansion in other sectors of the economy and other countries.

31.05.2018  “Banks’ traditional funding sources: opportunities for capital markets” Keynote address at 50th ICMA Annual Conference Javier Alonso Deputy Governor  Good afternoon. I would like to thank ICMA for its kind invitation to take part in this special day: ICMA’s 50th Annual General Meeting and Conference. It is a pleasure to be here and to speak to such a large audience of professionals from such varied backgrounds, representing, among others, issuers, intermediaries, investors, capital market infrastructure providers, regulators and supervisors. Capital markets being at the heart of this event, and banks being at the heart of my day to day work, what I would like to do in this speech is to highlight some developments related to banks’ funding sources that I think may offer new opportunities for capital markets. I would also like to briefly touch upon Brexit, an event that is generating great uncertainty and for which careful preparation is required. All of it, from my perspective as Deputy Governor of the Banco de España and as member of the Supervisory Board of the Single Supervisory Mechanism, which explains why my speech will be focused on developments in the European Union. New opportunities Let me start with what appear to me to be promising developments for reactivation of the markets. Firstly, the renewed political commitment reached at the Euro Summit on 15 December 2017 to press ahead with improvements to euro area governance provides new opportunities to accelerate progress in areas where developments so far have been somewhat sluggish.
And it will foreseeably have a negative impact on living standards in Iceland, as in many other places. Honoured guests: In 1973, the OPEC nations declared an embargo on the sale of oil to countries that had supported Israel in the Yom Kippur War. The goal was to use oil as a political weapon. The result was that the price of oil shot up from 3 US dollars per barrel to 12 dollars per barrel – a surge of nearly 300%. The shock put an end to a 30-year period of prosperity in the West and marked the beginning of a long inflationary episode. Actually, OPEC’s bid to use oil as a weapon misfired. Prompted by higher prices, many other countries started producing oil, including our cousins the Norwegians, and others began using other energy sources. Increased production pushed prices down once again. Oil merely marked the beginning of the surge in inflation, but over time it was not the driver of the episode. Inflation was catalysed by two factors, which varied in importance from one country to another. The oil shock came after the end of the Bretton Woods pegged exchange rate system, which had provided the anchor for stability. Thereafter, the response was up to each country. Many central banks had lost sight of their fundamental objective of maintaining price stability because they were too busy with other goals, such as creating jobs or financing government spending.

With a joint endeavour, the Bank and the Government faced down the challenge, focusing on households with targeted support measures and interest rate cuts. The Bank also used its international reserves to maintain exchange rate stability throughout the pandemic, thereby supporting the implementation of wage agreements. The economic recovery is now well underway, and unemployment has subsided. But even though the pandemic is more or less over, the fallout from it is still in evidence – fallout that was not entirely foreseen. Consumer demand has shifted worldwide. The household is now a workplace and a gathering place to a greater  1  degree than before, and people have chosen not only to kit out their homes more fully but also to move into larger space. At the same time, production has been disrupted in various ways, and delays in shipping over longer routes have led to shortages of a range of goods. And many people who lost their jobs during the pandemic have remained outside the labour force even though new jobs have been created, although this has not been the pattern in Iceland. It appears that a labour shortage is in the offing throughout the West. Isn’t it simple, then? When demand grows and supply shrinks, prices rise. For quite a while, many central banks expected the price hikes to be short-lived. Supply would surely respond. Inflation would taper off. But these views no longer hold sway. The problem is much bigger than that.
Overall, mainland GDP growth is projected to pick up markedly this year and remain relatively high in 2005 and 2006. GDP growth is projected to reach 3¼ per cent in 2004 and 2005, followed by a moderate decline to 2¾ per cent in 2006. This rise in overall output will then result in a gradual pickup in capacity utilisation in the years ahead. Projections are based on the technical assumption that the interest rate will move in line with forward rates (4 March 2004). The assumption implies that the interest rate will be somewhat lower in the near term, but that it will rise gradually from the summer, largely in parallel with the increase in interest rates among our trading partners. The krone is assumed to follow the path of the forward exchange rate (4 March 2004), which indicates expectations of a fairly stable exchange rate in the period ahead. A path that is in line with the projections in Inflation Report 1/2004 provides a reasonable balance between the prospects for reaching the inflation target and stable developments in the real economy. The aim of monetary policy is higher inflation. When inflation is as low as it is at present, it is appropriate to be particularly vigilant with regard to developments in consumer prices, although consumer prices may show random variations from one month to the next. Later this year, we will receive confirmation of whether consumer prices are rising in line with our projections.

Svein Gjedrem: Monetary policy and cyclical developments Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at a meeting hosted by Sparebank 1 at the University Center, Svalbard, 22 April 2004. The text below may differ slightly from the actual presentation. The address is based on the assessments presented at Norges Bank’s press conference following the Executive Board’s monetary policy meeting on 21 April, Inflation Report 1/04 and on previous speeches. The Charts in pdf-format can be found on the Norges Bank’s website. *  *  *  In many countries, the conduct of monetary policy is delegated to the central bank. In Norway, the responsibility for interest rate decisions was delegated to Norges Bank in 1986. The mandate for the conduct of monetary policy was laid down by the Ministry of Finance in the Regulation on Monetary Policy of 29 March 2001. The operational target of monetary policy as defined by the Government is inflation of close to 2.5 per cent over time. The target is symmetrical - it is just as important to avoid an inflation rate that is too low as an inflation rate that is too high. The inflation target provides economic agents with an anchor for inflation expectations. It influences their decisions concerning saving, investment, budgets and wages. Experience shows that there is no long-term trade-off between lower unemployment or stronger economic growth and higher inflation. The task of monetary policy is to provide a nominal anchor. The inflation target is such an anchor.