samchain/econo-pairs-v1 huggingface dataset:
Prasarn Trairatvorakul: Policy Forum marking the Bank of Thailand’s 70th anniversary Welcome remarks by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, to the Bank of Thailand’s 70th Anniversary and 3rd Policy Forum, Bangkok, 12 December 2012. *  *  *  Governor Glenn Stevens, Distinguished Guests, Ladies and Gentlemen, 1. It gives me great pleasure to extend a warm welcome to all of you, our distinguished guests, to the Bank of Thailand’s Policy Forum. Today’s gathering marks the third such event organized by the Bank of Thailand. The policy forum serves as a platform for prominent academics, policy-makers and market participants to learn from the visions and insights of outstanding international leaders. More importantly, the discussion and knowledge-sharing arisen from this forum will further equip the Bank of Thailand with a broader and deeper pool of knowledge to pursue its mandate. On that note, let me add that this year marks the 70th anniversary of the Bank of Thailand, an institution that has always been committed to preserving economic and financial stability. This commitment would not be possible without continual upgrading of our knowledge base through forums such as the one today. 2. Today, the Bank of Thailand is truly honored to have Governor Glenn Stevens of the Reserve Bank of Australia with us to share his thoughts on “Challenges for Central Banking”. This talk is especially timely because the effects of the global crisis are spreading to our region.

For instance, the IMF projects the aggregate euro area deficit for this year to be just over 3% of GDP, compared with around 8% in the U.S. and almost 10% in Japan. The equivalent figures for gross debt are around 90% of GDP in the euro area, compared with 106% in the U.S. and 235% in Japan. The right response to this discrepancy between fundamentals and perceptions is not defeatism. It is to fix the institutional flaws that facilitate it. Again, the European Council took an important step in this direction at the recent summit. Building on the report presented by the Presidents of the European Council, Commission, Eurogroup and ECB, it called for a specific and time-bound roadmap for the achievement of a genuine Economic and Monetary Union. This roadmap will be presented by the end of 2012. This is a very important development, for two reasons. First, it sends a clear signal of Member States’ commitment to the euro and to making EMU work. This should help remove  BIS central bankers’ speeches  3  investor concerns about the future integrity of the euro area. Second, the report presented by the Four Presidents is far-reaching and comprehensive – it has been designed to address the key challenges facing EMU in all relevant policy areas. It therefore proposes work on four parallel tracks: 1. The first is a financial union, with a single framework for supervising and resolving banks and for insuring customer deposits.
It fell sharply during the first half of this year (relative to income) and is likely to have fallen further since then (the dot at the end of Chart 9 is an estimate of the position at the end of Q3, based on recent moves in asset prices). All this suggests that, if household spending has been unusually independent of income since the pandemic, that is less likely to be the case from now on. The correlation with income is likely to be re-established. And it therefore mattered quite a lot, for the MPC’s projections in August, that households were set to experience further steep rises in their energy bills. Given the path of wholesale gas prices implied by financial markets at the time, OFGEM’s price cap was set to rise (in the central forecast) by over 3% of household income by next spring. Households’ real disposable income was projected to decline by 2½%, with consumer spending down by over 1%. This reduced inflationary pressure in the medium term, helping to pull inflation below target towards the end of the three-year  Bank of England  Page 17  forecast period. (I say “helping” because other things mattered too, not least the further rise in Bank Rate, to a peak of around 3%, then priced into financial markets.) It therefore mattered too that the new government then launched its Energy Price Guarantee, forestalling the rise in energy bills.

However, if energy resources and gold are excluded from the equation, raw material prices in dollar terms are at a similar level to the beginning of 2004. While the price of oil receded from its high-water mark in the wake of Hurricane Katrina to back within the region of USD 60 a barrel, the gold price is trading at a 24-year high of over USD 500 an ounce. A number of factors have contributed to this increase in price. The physical demand for gold has intensified significantly, rising by about 40% this year alone in India, which is the largest market. Increased demand at the central banks of emerging countries and in oil-producing countries is also being reported. Moreover, the currently low real interest rates push down the opportunity costs of interestfree investments, such as gold. Given, too, that the gold market is largely illiquid, even small shifts in demand can trigger serious price effects. In view of the fact that implicit inflation expectations are still firmly anchored – according to inflation-protected bonds and surveys – inflation fears can hardly be considered to be the main driver behind this gold price increase. SNB’s performance Taking into consideration the development of the gold price, the SNB yielded an average annual return of just below 1% on its assets between 1980 and 2005 (end of September). While interest-  BIS Review 86/2005  1  bearing assets posted a higher average yield during this period, the SNB had to settle for overall losses in gold.
Ajith Nivard Cabraal: Practical, not conventional, wisdom has driven Sri Lanka’s rebuilding and reconciliation Article by Mr Ajith Nivard Cabraal, Governor of the Central Bank of Sri Lanka, 3 April 2014. *  *  *  About five years ago, Sri Lanka faced three daunting economic challenges. To deal with those challenges, the Sri Lankan authorities implemented certain pragmatic strategies that challenged conventional wisdom. At the time of defeating terrorism in May 2009, a massive investment was required to restore normalcy in the terror-torn Northern Province. Conventional wisdom suggested that the rebuilding, rehabilitation and restoration should be carried out at a moderate pace, without burdening the economy unduly, and without placing government expenditure under stress. However, even at the risk of experiencing a spike in the fiscal deficit in the years 2009 and 2010, Sri Lanka executed a rapid action plan to de-mine land, re-settle IDPs, and upgrade infrastructure in the war-affected areas. That investment brought quick relief to the hundreds of thousands of people who had suffered during the 30 year war. The cost? A staggering $ 3.2 billion over 4 years, or nearly 6% of GDP! The direct benefit? Rapid clearance of over a million landmines from the Northern Province: speedy resettlement of nearly 300,000 IDPs; early restoration of the infrastructure: considerable progress in agriculture, fisheries and SME activity: significant increase in industrial production and domestic tourism: major transformation in the financial sector; and creation of new entrepreneurs and job opportunities; The overall outcome?

The authorities’ view was that since the conflict had ended, there was an urgent need to reconstruct the terror-affected areas, which covered almost one third of the country’s land mass, and two thirds of its coastal belt. New economic activities had to be promoted for the peace dividend to be realized. Such new activities would necessitate a high import expenditure, which in turn, would create new capacity for economic growth. In such circumstances, if the Sri Lankan Rupee were to depreciate I sharply, it would lead to a significant reduction in the imports necessary for reconstruction and a slow-down of new economic activities. Those outcomes, together with the resulting higher levels of inflation would have kept Sri Lanka trapped in the vicious cycle. Accordingly, through negotiations, the Sri Lankan authorities were able to convince the IMF that Sri Lanka would commit itself to building its reserves, but would do so, while allowing the exchange rate to adjust according to economic fundamentals and market conditions, instead of forcing an artificial, sharp depreciation of the currency. The Sri Lankan authorities also took the view that lower tax rates would spur growth and ultimately increase revenues, and based on such view, they were able to convince the IMF that it would be better to lower tax rates and encourage economic activity. Subsequent economic outcomes have since confirmed the wisdom of both these moves by the Sri Lankan authorities!
The effects of the interest rate decline on demand, output and employment have been pronounced. It has taken time for inflation to pick up. This partly reflects low external interest rates and high oil prices, which have moderated the impact on the krone exchange rate. Higher imports from low-cost countries, competition and improved efficiency in Norwegian production have also kept inflation at a low level. Initially, it was the fall in prices for imported consumer goods that pushed down underlying inflation. After a period, the rise in prices for domestically produced goods and services also slowed. This was due in particular to increased competition in some goods and service markets. At the same time, wage growth eased as a result of lower capacity utilisation in the economy. A more subdued rise in house rents also contributed. Inflation measured by the CPI-ATE reached its lowest level in the first months of 2004. Inflation remained at below ½ per cent until the end of summer and then picked up through the autumn. Inflation moved up primarily as a result of a slower decline in prices for imported consumer goods. The depreciation of the krone since the beginning of 2003 has contributed to these developments. In addition, the rise in prices for domestically produced goods and services stabilised, and towards the end of 2004 there was a tendency towards a higher rise in prices for these goods and services. At the beginning of 2005, inflation measured by the CPI-ATE was lower than expected.

In the construction industry, the labour market is tight and enterprises are making use of foreign labour to some extent. The supply of skilled labour is, however, a constraint on growth potential. Signals from service industries also indicate that the supply of labour is becoming more limited. The general level of investment in this region is relatively stable. Investment activity in the public sector appears to be somewhat lower in 2005 than in 2004. In manufacturing and services, there are signs of increased investment activity. Tender prices are rising slightly in the building and construction industry as a result of increased costs and a higher level of activity throughout the country. Prices have risen slightly in manufacturing and service industries. In retail trade, prices have changed little or remained unchanged. Profitability is improving due to increased activity, but there are no major changes for small and medium-sized enterprises. In the approved budget for 2005, the structural, non-oil deficit increases compared with 2004. It therefore appears that fiscal policy will provide some stimulus to growth this year. In the National Budget for 2005, underlying spending growth over the central government budget was estimated at 5.2 per cent, which is somewhat lower than the previous year and somewhat lower than estimated nominal growth in mainland GDP. As from 2006, it is assumed that nominal growth in central government expenditure will be approximately the same as nominal growth in central government revenues and that the real tax level will remain unchanged.
At the same time, EMU and the single market are linked at another level; as an American colleague recently remarked, “If EMU would help to secure the single market’s survival, it’s worth all the other risks.” Another important long-term consideration is the structure of Europe’s business sector. I believe we are now experiencing a formative phase. European manufacturing and services companies are being rapidly restructured, with effects that are likely to be considerable. Many forces are contributing to this process; the globalisation of production is one and another is the single market. But there can be hardly any doubt that EMU is also playing a part, particularly for the financial sector. Participation in the euro area would give Sweden and Swedish companies access to a larger capital market that is expanding rapidly. Assessing what being outside the monetary union entails in this phase is not easy. Personally I believe the effects are negative. I also think they may turn out to be considerable. A related matter is the location of companies. Representatives of large Swedish groups, as well as the Federation of Swedish Industries, for example, frequently state that euro participation would result in higher investment in Sweden by both Swedish and foreign companies. This argument has also been heard recently in connection with some of the relocations of large companies. Decreased exchange risks would be one of the reasons.

The government has decided to accelerate certain projects on which it will spend ISK 6 billion. Local authorities and other parties have announced measures aimed at the same objective. So it is clear that much has been done which can be expected to increase economic growth and reduce unemployment in the coming months. Ahead of us are the most extensive construction projects in Icelandic history, which will have a major impact on the economy in both the short and long term. They will require sound economic management. It is important to foresee early enough what effects this development could have if no  action were taken. It would be completely irresponsible to simply allow things to take their course as if nothing needed to be done to compensate for these developments, as has actually been proposed in some quarters recently. The Central Bank’s analysis of the proposed development indicates that, with appropriate economic management actions, it should be possible to maintain economic stability and keep inflation under control. The Central Bank of Iceland will do its utmost to achieve this, as it naturally bears an indisputable legal responsibility to do so.
Among the other tools and risks that require particular attention, I would like to turn now to interest rate risk and macroprudential stress testing. 5) On interest rate risk in the banking sector At present, interest rate risk in the Russian banking sector is low. This is largely thanks to the fact that after market stabilisation which took place in 2015 and the period following, the economy learned to adapt to external shocks, and confidence in implemented monetary policy grew. Amid slowing inflation and decreasing interest rates on bank loans and deposits, banks have been able to increase their margins of interest. This in turn has contributed to growth in net interest income, which reached a three-year peak in the fourth quarter of 2016 to exceed 700 billion rubles. Despite low interest rate risk for Russian banks, it is important not to forget the need for improvement in systems of risk management. In terms of inflation targeting, interest rates are quite heavily dependent on inflation behaviour and can significantly impact the value of credit institutions’ assets and liabilities, as well as their interest margins. When taking this into account, the challenge of effectively managing banks’ interest rate risk becomes very important. Recently, particular attention has been paid to this issue by the world’s leading central banks. A year ago, in April 2016, the Basel Committee on Banking Supervision (BCBS) released their benchmark standard, dedicated to the management of interest rate risk in banking books.

I will be talking about issues like the present state of the Russian economy and the impact this has on financial stability; key challenges facing the world today; the current situation in the banking sector; and finally I would like to go into more detail on some policy measures undertaken by the Bank of Russia for the express purpose of mitigating risks in the Russian financial system as a whole. 1) On key risks and the current state of the Russian economy First of all I would like to draw your attention to a number of improvements in the Russian economy that began to take place in 2016. GDP moved into growth from the third quarter of 2016, and we expect that the positive effects of this change will continue to be felt. According to our assessment, the GDP will see growth of 1-1.5% in 2017, and 1-2% in 2018–19. It is worth noting that in recent years indices of business activity have grown considerably and now sit at the highest levels of the last 9 years: in industry the PMI rose from 49.8 points in January 2016 to 52.4 points in March 2017; in the service sector – from 47.1 to 56.6 points over the same period. Economic recovery has contributed to the reduction of current credit risks in the banking and financial sectors as a whole. Inflation is falling even more quickly than expected. The annual rate of consumer price growth fell to 4.3% in March 2017, down from 12.9% in December 2015.
Table 2 Short and long interest rates in the UK Short rate  Long rate  Mean  St. dev  Mean  St. dev  1950-1959  2.87  1.67  4.40  0.88  1960-1969  5.51  1.31  6.58  1.07  1970-1979  8.92  2.81  11.94  2.41  1980-1992  11.28  2.23  10.83  1.88  1993-2002  5.58  0.88  6.38  1.59  1950-2002  7.09  3.59  8.19  3.32  Note: Short rates are three-month treasury bill yields. Long rates are 20-year gilt yields. Data are monthly, and use the rate at the close of the last business day of the month. Data up to September 2002. Source: Global Financial Data, Inc.; Bank of England calculations. BIS Review 68/2002  3  Chart 2 Total inflation premium expected in ten years time, UK 1997  Note: The total inflation premium is measured as the difference between implied forward nominal rates on conventional gilts ten years hence and implied real rates on index-linked gilts ten years hence. Source: Bank of England. So price stability appears to have led to a more stable macro economic environment, with fewer surprises to inflation, less inflation uncertainty, and a lower level of real interest rates. Has this improved nominal performance led to greater stability of the real economy? Table 3 shows that since 1992, output has grown at a little above its forty year average, and has been much more stable than before.

The standard deviation of quarterly growth rates over the past decade was less than half that in earlier periods. Can these gains in terms of greater stability be attributed to a more stable monetary regime? After all, a sceptic might argue that the causation runs from a more stable economic environment to lower inflation. But some of these alternative explanations, such as the rise in the share of services in total output and better inventory management, are part of longer-term trends and do not fit well with the observation that volatility has fallen sharply over the past decade. And shocks to the UK from the world economy and from the sterling real exchange rate have been as large, if not larger, over the past 3 five years as in earlier periods. 3  Most of the evidence on the link between inflation and stability comes from the United States where the greater stability of output is evident over the past two decades. A number of recent studies have concluded that at least part of the explanation for greater stability can be attributed to better monetary policy, for example Taylor (1998).
It is possible to further decompose ROE to provide additional insight into how banks increased reported returns as follows:  BIS Review 95/2010  9  Banks can boost ROE by acting on any of the terms on the right-hand side of equation (1.1): increasing assets relative to capital (financial leverage), holding a larger proportion of capital 4 other than as common equity (common equity margin), or assuming a greater degree of risk per unit of assets (return on risk-weighted assets, RoRWA) – leveraging assets, leveraging capital structure or leveraging regulation. Table 4 shows two of the elements of this breakdown for the major global banks – leverage and unit risk. For most banks, the story is one of a significant increase in assets relative to capital, with little movement into higher risk assets (unit risk makes a negative contribution for most banks). Those banks with highest leverage, however, are also the ones which have subsequently reported the largest write-downs. That suggests banks may also have invested in riskier assets, which regulatory risk-weights had failed to capture. Table 5 looks at the third component, the common equity margin, of some of the same global banks. Among at least some of these banks, this margin makes a significant contribution to ROE growth, as banks moved into hybrid Tier 1 capital instruments at the expense of core equity. As such hybrid instruments have shown themselves largely unable to absorb losses during the crisis, this boost to ROE is also likely to have been an act of risk illusion.

Only in this manner electronic payment advantages and all other facilities will be equal to you and to all the public in general throughout the territory of the Republic of Albania. I believe, in the spirit of this reasoning, we shall establish real opportunities for a harmonised geographical progress, providing a concrete contribution to the growth of country’s welfare. 2  BIS Review 6/2005