samchain/econo-pairs-v1 huggingface dataset:
For a practitioner of monetary policy like myself, this area contains a number of difficult issues. I shall be raising some of them this morning and they will also be discussed during the conference. By the end of the conference I hope we will be able to look back on a fruitful discussion and have a better understanding of the issues and problems involved. How should monetary policy respond to movements in asset prices? This depends on how the central bank chooses to use the information contained in asset prices. In a regime that explicitly targets inflation, asset prices are taken into account via the effects on aggregate demand. Rising share prices increase household wealth and that would raise consumption for a given level of income if these increases in wealth are considered to be of a permanent nature. At the same time, consumer confidence boosted by higher share prices could potentially make individuals more prone to spend their increased wealth. An increase in share prices also makes investment more attractive to firms since it increases collateral values and lowers the cost of new capital relative to existing capital. If share prices predict higher expected output growth, this could also lead to more investment. If the asset prices on which households and firms base their consumption and investment decisions prove to be too optimistic, this would create inflationary pressure in the short term. An important question in this context is how sensitive households’ and firms’ consumption and investment responses are to changes in asset prices.

The bursting of a large property price bubble can have serious effects on financial intermediation. This could motivate an early monetary policy response. The cost of this pre-emptive strike strategy would have to be weighed against the fact that inflation and real activity will be lower than desired in the short term. Is this a price worth paying to maintain stability in the financial system? In order to answer that question, we need to know how sensitive the financial system is to a severe fall in property prices? Another problem with trying to act pre-emptively is, how do we spot the price bubble in time? So even though in a conflict between short-un price stability and financial stability, the latter were to be viewed as the more important, implementing such a policy could be fraught with substantial practical problems. The grounds for a pre-emptive strike against an equity price bubble are perhaps less compelling than for a property price bubble. The US experience from the 1987 stock market crash seems to be that, with an appropriately conducted monetary policy, the effects on real activity can be relatively small. With New York Stock Exchange order flows grossly out of balance on 19 October 1987, with the solvency of brokerages and clearing houses in doubt, banks were growing nervous and reluctant to lend. This was a clear case of systemic risk and before the market opened on 20 October the Fed affirmed its responsibilities to serve as a lender of last resort and also substantially eased monetary policy.
The massive surge of inflation in the 1970s and 1980s and the reluctance of some finance ministries (and their associated central banks) to combat it made economists and the public aware that politicians may not have the appropriate incentives to bring or to keep inflation down. Why are independent central banks more successful when it comes to bringing down inflation rates? The reason is that politicians and central bankers tend to have somewhat different objectives and largely different time horizons. Technocrats at central banks mandated to ensure monetary stability can easily afford to take a long-term view, while politicians feel much more constrained by the pressure to produce short-term results. This seems relevant since an inflation-preventing or inflation-combating policy is usually associated with real costs in the short run, while the benefits appear only over time. A government might be seduced into conducting an inflationary policy in order to reap benefits in the short term, while the costs will only become evident years later. Therefore, there is a strong probability (but, of course, no guarantee) that independent central banks will do a better job than governments with regard to the issue of inflation. This insight - and perhaps the relative success of most independent monetary authorities with the disinflation process in the 1970s - has paved the way for granting more independence to monetary authorities. Essential preconditions for the independence of a central bank include a solidly based consensus concerning its mandate and a commitment to transparency and accountability.

For instance, if I had to mention three of them, I would choose: (i)  overseeing the development of awareness and training within the organisation;  (ii)  monitoring patch management in order to make sure that identified flaws are corrected in due time;  (iii)  and, last but not least, capturing the effectiveness of the identification and authentication processes. In a nutshell, key indicators help to improve the governance of the IT security system. ** To conclude, I believe that it is necessary to better structure the international governance of cyber security in the financial sector: it is clear that the different regulatory and supervisory authorities are aware of “cyber risks”. This is becoming apparent through the numerous initiatives at various levels (domestic, European, and international). While this is welcome, it is both delicate but necessary to strengthen international cooperation in order to ensure that there are neither loopholes nor overlaps and that there is convergence towards proposals and solutions that can easily be shared with others.
Especially important in this regard is to moderate and possibly reverse the course of public indebtedness, adopt a framework to capitalize the banking system and ensure a sustainable evolution of household borrowing. The signals of the government regarding the orientation of its fiscal policy, its backing of the new General Banking Act and the reactivation of its search for mechanisms to consolidate borrowers’ financial information are very 6  positive in this regard. Equally valuable in dealing with future turbulences seems to be to strengthen fiscal institutions by enhancing the status and autonomy of the Fiscal Advisory Council, as well as acknowledging the role of institutional investors in the Chilean economy in the face of future reforms. Dear senators, the Chilean economy is progressing in the recovery of growth and the closing of gaps. Rather than a result, this is a good start for a more favorable stage of the business cycle. Many challenges lie ahead. It is important to deepen the recovery of investment, that the labor market be strengthened and that competitive advantages be exploited to make this recovery more self-sustained and shared. Greater long-term growth calls for more structural changes that will help raise productivity. The Central Bank will be there to ensure that imbalances or vulnerabilities do not incubate in the process, which later may require more costly adjustments. Together we also have the responsibility to strengthen those factors that allow us to better withstand external shocks that will sooner or later be felt.

Several construction indicators show some stagnation lately, such as sales and shipments of materials and sectoral employment. The last survey of the Capital Goods Corporation revised downward the expected investment in construction and engineering works for this year, as some plans have been postponed. About housing, updated figures from the Chilean Chamber of Construction show that housing sales have remained stable, while the available stock, in general, is still high. Finally, our latest Business Perceptions Report, published in May, reports dissimilar views about companies’ investment plans, with significant idle capacity in some of them, especially in the north of the country and in some specific sectors. For this year, we estimate that GDP will grow in the range between 3.25% and 4%, which compares with the 3% to 4% expected in March. This combines the actual activity data known so far with annual rates of change for the second half of the year that are lower than those of the first half, reflecting a higher comparison base for the same period of 2017 and the aforementioned moderation in the pace of growth in final domestic demand. Beyond this year’s forecast, our view on the evolution of growth in the 2018-2020 period and our assessment of capacity gaps in the economy has not changed much. For 2019 and 2020, the projected ranges are unchanged. Thus, we continue to expect that in 2019 the economy will grow between 3.25% and 4.25%, and between 3% and 4% in 2020 (Figure 4).
William C Dudley: Global financial stability – the road ahead Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Tenth Asia-Pacific High Level Meeting on Banking Supervision, Auckland, New Zealand, 26 February 2014. *  *  *  It is a pleasure to have the opportunity to speak here today. This is my first time in New Zealand (not counting a brief stop at the Auckland airport). I’m delighted to be here and am heading down to the South Island tomorrow. Today, I am going to talk about the challenges that face us in ensuring stability in the global financial system. While we have made considerable progress in strengthening the financial system – for example, large global banks have considerably more capital and liquidity resources than prior to the financial crisis – there is still a significant amount of hard work ahead for all of us. For example, we need to develop resolution mechanisms that will work on a global basis and we need to ensure that the clearing of standardized over-the-counter (OTC) derivatives through central counterparties (CCPs) is done safely. We also need to improve our ability to aggregate and share data. We need to do this in order to develop a coherent view of the global financial system so that we can deal with emerging vulnerabilities in a timely and effective way. As always, my remarks today reflect my own views and not necessarily those of the Federal Reserve System.

Central banks are meant to provide liquidity support only to solvent firms so that the central banks avoid taking on credit risk. An overreliance by firms on access to central bank liquidity can expose the central bank to the risk of loss. Finally, in some cases, central bank liquidity provision can become stigmatized. In this case, financial firms are prone to underutilize this source of liquidity – a decision that can have adverse consequences for markets and the availability of credit. Liquidity buffers reduce the likelihood that this stigma constraint will become binding. The on-going Basel discussions have focused on a short-term liquidity requirement – the Liquidity Coverage Ratio (LCR); and a longer-term liquidity requirement, the Net Stable Funding Ratio (NSFR). The intention of the LCR is for banks to hold sufficient high-quality, liquid assets that can be easily and quickly converted to cash to cover expected liquidity outflows in a stress scenario over a 30-day period. Unlike illiquid assets, the conversion of these high quality liquid assets into cash should not create any fire sale dynamics. However, it is important that banks actually use this liquidity buffer when there are liquidity outflows, rather than attempting to maintain their LCR at 100 percent by selling other assets. The OTC derivatives markets remain another important source of potential instability.
And any shocks that affect inflation in the near-term should have no impact on inflation expectations further out, because people believe we will take whatever action is needed to return inflation to target. And by this measure, the current policy framework seems to be highly credible. There are those who claim that the MPC has never really been tested. In fact, the UK economy has been hit by a number of quite severe shocks over the past five or six years. International financial markets were convulsed by the Asian financial crisis in 1997, the Russian debt default and LTCM crisis in 1998, the 9/11 terrorist attacks, the Enron and WorldCom scandals in 2001/2 which dented confidence in corporate governance. Around the same time, we also saw the bursting of the dot.com bubble and a slowdown in world activity. In the past decades, shocks like this would almost certainly have destabilised UK economic activity and inflation. That, after all, is what happened in the 1970s, when the price of oil quadrupled, and then again in 1979 when it more than doubled. Since the late 90s however, medium-term inflation expectations - both as measured by surveys and as implied by financial asset prices - have barely budged. Even this year, when oil prices rose by over 70% to their peak in late October before falling back, and other producer input prices, including metals, have surged ahead, both surveys and financial asset prices show inflation expectations fluctuating around the MPCs inflation target, within a very narrow range.

Rachel Lomax: Stability and statistics Speech by Ms Rachel Lomax, Deputy Governor of the Bank of England, to the North Wales Business Club, Llandudno, Wales, 23 November 2004. I would like to thank Simon Hayes and Jens Larsen for research support and Spencer Dale, Mark Cornelius and colleagues at the Bank of England for helpful comments. *  *  *  “The first time we saw the MPC we were given the folder of all the statistics they had which was something like a foot high. We found it hard to believe that they all read that stuff but they claimed they did.Statistics seem to be their life blood…” Chairman, House of Lords, Select Committee on Economic Affairs, HL Paper 176 - II. The past decade has been a time of unparalleled stability for the UK economy. It is more than twelve years since the United Kingdom experienced a single quarter of negative GDP growth. Consumer spending, investment and output have all shown a degree of stability over the past ten years which is unmatched in any decade since the war - indeed in the twentieth century. Inflation has been impressively stable too, as well as lower on average than at any time since the war. And, to complete the story, employment has grown steadily, and unemployment has fallen to a 30 year low. A stable economy has created a much better climate for business. So no wonder soaring oil prices make people nervous.
In Remaking Malaysia, the strategy is essentially to focus on our distinct capabilities and to leverage on the areas of our strengths to secure our competitive advantage. Let me touch briefly on the current economic developments: •  Malaysia has seen a steady and strengthening economic recovery since 2001, with the growth performance strengthening substantially in the first half of this year increasing the potential for growth for the year as a whole to surpass our earlier estimates. •  This favourable performance has been accompanied by a rebalancing of focus between external and domestic sources of growth. In the external sector, there has been a greater balance between the traditional and new markets and between the goods and services sectors. •  In the domestic sector, there has been a greater balance between the economic sectors. The strategy to have a more diversified economic structure and more extensive markets has aimed to reduce vulnerability of the economy to global shifts in demand in any specific sector or to any particular region. •  The positive fundamentals of low inflation, strong external balance, low debt and stable employment conditions have accorded policy flexibility to support the growth during this period. Going forward, the process of rebalancing the economy to enhance the competitiveness of the economy can be expected to intensify and widen.

Philipp M Hildebrand: Developing countries and international capital markets Summary of a speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, to economiesuisse, Zurich, 14 June 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  After having plummeted on the back of the Asian crisis, capital flows to developing countries have risen considerably again in the last three years. In 2005, they are likely to reach the approximate level at which they stood shortly before the Asian crisis. Capital flows are channelled mostly to a few emerging markets, notably China. China’s monetary order is currently undergoing profound changes, with the country gradually liberalising capital movements. The concept of the “impossible trinity”, which was developed by the Nobel Prize winner Robert Mundell, asserts that this will inevitably lead either to a loss in monetary autonomy or to a flexibilisation of the exchange rate regime. Both trends can be clearly observed: the pressure on the fixed exchange rate on the one hand, and the rapid expansion of the monetary and credit aggregates on the other. In the longer term, China’s monetary order will probably move towards floating exchange rates. This transition will hopefully be successful. As China’s monetary policy of gradual change has so far proved its worth, it is likely to serve as an example to other developing countries.
But I hope I have persuaded you that the regimes for the issuance and distribution of securities, for trading platforms, and for asset management can also matter to the resilience of the financial system. I hope that there may be some agreement that, from a financial stability perspective, policies might sometimes more appropriately be cast in terms of inter-dealer (or “intra-financial system”) markets and “end user markets” rather than in terms of public markets and private transactions. And I hope that there can be a consensus that central banks can play a useful role in monitoring and fostering robust practices and infrastructure in the short-term financing markets. The co-incidence of interests between macroprudential authorities and securities regulators is beginning to be recognised. At a global level, IOSCO is represented on the FSB and, perhaps encouraged by that experience, earlier this year, it published its report on “Mitigating Systemic Risk”23. In Europe, the European Securities Markets Authority is on the Systemic Risk Board. In the USA, CFTC and SEC are on the Financial Stability Oversight Council. 23  IOSCO (2011), Mitigating Systemic Risk: A Role for Securities Regulators. IOSCO has added to its Core Principles two new principles on how securities regulators should seek to contribute to containing systemic risk. BIS central bankers’ speeches  11  What I have been discussing is especially important for the UK. London’s capital markets are so international that threats to stability from any corner of the globe ricochet through our system.

Timothy F Geithner: Economic policy and the sustainability of US productivity growth Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Puerto Rico Bankers Association Luncheon, New York, 12 April 2005. *  *  *  Thank you for the opportunity to speak to you today and to support the important work of improving economic and financial education. I am going to focus my remarks on two important dimensions of our economic future - the acceleration in the rate of growth in productivity of the past decade and the more recent decline in our net national savings rate. The former offers considerable promise for future growth in the living standards in the United States. The latter presents some risk and challenges to that brighter prospect. Both are areas where education, education in general and financial education in particular, can make an important contribution. The United States has been through an exceptionally good decade of economic performance. While growth in most mature economies slowed, we averaged a respectable 3.5 percent growth in real GDP a year. Inflation moderated to a rate of around 2 percent, and long term inflation expectations stayed stable for some time at quite moderate levels. The volatility of U.S. output, which declined significantly in the mid-1980s, remained low, meaning growth was smoother, with recessions less frequent, shorter and shallower.
I think it’s hard to predict which of these is more likely. Some remarks about wage growth and unemployment: don’t forget productivity  One consequence of being uncertain about supply growth, for a monetary policy maker, is that you begin to rely somewhat less on indicators of economic growth – it’s no longer so clear what constitutes a “strong” or a “weak” GDP print, relative to underlying productivity – and instead put more weight on direct measures of spare capacity, such as unemployment. However, that’s advisable only to the extent you trust the link between unemployment and wage growth. In recent years, many seem to have lost that trust. According to the “Phillips curve”, low unemployment is meant to push up wage growth. Yet here we are with unemployment at a four-decade low and wages still growing at a rate well below the historical average. As a result, several commentators have questioned the MPC’s central prediction that wage growth will rise next year. Some have gone further and pronounced the death of the Phillips curve. 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  There are always risks to any forecast. But the latter claim, at least, is premature. Using annual data, Chart 10 plots UK wage growth, less expected inflation, against the rate of unemployment – the UK’s Phillips curve. The blue dots cover the first twenty years of inflation targeting, till 2012, the red dots the five years since.

Every small country should be able to seize the opportunity if policymakers get a few fundamental things right. I am now going to name four of these fundamentals. Four cornerstones of competitiveness The first, if not the most important, cornerstone of competitiveness is society’s openness to new ideas, its willingness to communicate and ability to adapt. Of all factors that support economic growth, openness is universally considered the most important. Openness to ideas allows better understand and make use of the global marketplace. Policy-makers can do a lot to promote openness. Efficient telecom infrastructure and Internet penetration serves as one way to do it. Market liberalization and competition are the keywords here. Another equally important factor is the country’s ability to attract highly mobile professionals. Consequently, issues like security, quality of public and social services, language skills and clean environment are also becoming increasingly relevant in ensuring competitiveness. The second and equally important factor in supporting innovative society is the spirit of entrepreneurship and culture of risk-taking. Openness makes the world and its ideas accessible to people. However, you need an entrepreneur to make use of these opportunities and ultimately bring benefits to the whole society. Today, competitiveness is directly and positively correlated to the ease of doing business. There are several areas where policy developers can encourage risk-taking. For instance, better access to public services is one of the most instrumental ways to reduce red tape and increase the efficiency of business environment, either by means of the Internet or any other means.