samchain/econo-pairs-v1 huggingface dataset:
Mr McDonough comments on the implications for the strong US growth for the world economy  Speech by Mr William J McDonough, President of the Federal Reserve Bank of New York, before the Japan Center for Economic Research, Tokyo, on 30 March 2000. *  *  *  Good afternoon, ladies and gentlemen. It is a great pleasure to be invited to speak before such a distinguished audience. My thanks to the Japan Center for Economic Research for extending such a kind invitation. This afternoon I would like to share with you some of my thoughts on the US and the world economies as we move forward into the 21st century. To do so, it is helpful to step back and take a somewhat longer-term view of how the stage was set for much of the current strong economic performance the US economy has enjoyed in recent years. In addition, I would like to comment on the implications of the strong US growth for the world economy. The United States is now experiencing the longest economic expansion in its history. This expansion, which began in April 1991, not only has reached record length, but also has done so in a far stronger manner than had been expected. Most notably, inflation has been subdued, notwithstanding the most favorable labor markets that the United States has experienced in a generation, and the country’s fiscal accounts are in surplus. There is no question that this expansion reflects some remarkable changes in the US economy.

This part of the monetary policy decision-making process is important, as it provides a base for the Executive Board to be able to choose the decision alternative that appears to provide the best target fulfilment. The staff’s proposal for monetary policy is the most important base for the discussion at a longer meeting that includes a large number of analysts from the Monetary Policy Department and the Executive Board, and which is normally held around two weeks prior to the monetary policy meeting. The Financial Stability Department of the Riksbank also plays an important role in the analysis work and therefore takes part in this meeting. The Riksbank has always considered it important to monitor developments in the financial markets and in the Swedish banks, and this has been particularly important in the forecasting work during the financial crisis. The Executive Board members’ input is important at this meeting and may in particular affect the forecast for the repo rate. However, this has repercussions for the forecasting work as a whole, as the future repo rate affects most of the other variables in the forecasts. The Executive Board may also have views on other parts of the forecasts than the repo rate path, but the discussion usually mainly centres on what is a well-balanced monetary policy. At a shorter meeting that usually takes place the day after the large meeting, the members of the Executive Board have the opportunity to discuss the main scenario and give their views on it in a more limited circle.
True, our baseline scenario contemplates, among other assumptions, that such dynamism will be accompanied by improved agents’ expectations. As we have said before, this is a sensitive point that requires us all to cooperate. We must also bear in mind that the terrible natural disaster that just hit the north of our country will have some effect on the output figures that will be released in the coming months, which at this moment we can only guess and which will be able to assess only as time goes by. Moreover, as we well know, every adjustment process has its costs. In our case, the main associated cost has been higher inflation. In recent months inflation has exceeded forecasts and we estimate that it will remain above 4 percent for a longer time, strongly influenced by the depreciation of the peso, which has been greater and more persistent than previously thought. Thus, although we understand that higher inflation is part of the adjustment process I have described above, I want to be clear that its current levels have exceeded our estimates, and that inflation being above the upper limit of the tolerance range for several months in a row is a situation that does not leave us satisfied.

Likewise, we foresee that fiscal policy will contribute to expenditure growth significantly during this year, especially through increased public investment. As usual, our projections rely on a number of assumptions, and an important one is that consumer and business expectations will recover. Recent data show a slight revision upward of these indicators, which are still clearly pessimistic nonetheless. Meanwhile, information gathered in the Business Perceptions Report a quarterly publication by the Bank, points to moderate performance in businesses in 2015, with investment plans primarily focused on capital replenishment. Turning to inflation, in the baseline scenario the CPI will stay above 4 percent annually for some more months, approaching 3 percent over the course of 2016. For the CPIEFE, our preferred measure of core inflation, our forecast for 2015 is revised up and is expected to approach 3 percent in 2016 and stay in the neighborhood until the end of the projection horizon (figure 9). This trajectory assumes that the pass-through from the peso depreciation of recent months to prices will stand in the upper part of historic patterns; that real wages will be adjusted in line with productivity; and that capacity gaps will persist over the projection horizon. For the real exchange rate, the forecast uses as a methodological assumption that it will remain similar to its current value, considering that it is within the range believed to be consistent with the state of the business cycle and its long-term fundamentals.
The aims of transparency are to allow better informed decisions in both public and private sectors, to reduce the risk of contagion by allowing markets to differentiate among borrowers and to encourage macroeconomic policy to become more predictable. Transparency is not simply a question of making available certain data. It is an approach to economic policy, almost a way of life. The G22 Report of the Working Group on Transparency and Accountability (which I was privileged to co-chair with Andrew Sheng of the Hong Kong Monetary Authority) was published in October 1998. Its recommendations were endorsed in full by the G7. It stressed the importance of transparency in three different sectors: national governments, the private sector and the international financial institutions. Good progress has been made in implementing many of its recommendations. Rather than give an exhaustive account of progress in transparency, let me give a few examples. In March of this year, the IMF’s Special Data Dissemination Standard was strengthened by the inclusion of a template covering the disclosure of net foreign exchange reserves and short-term foreign currency liabilities of central government. These data are required to be published monthly with a lag of no more than one month, and the transitional period for observing the standard runs to the end of March 2000. Agreement is very close on a Code of Monetary Policy Transparency to match the earlier Code on Fiscal Policy Transparency. BIS data on international banking statistics will be produced quarterly from next spring and the lag in publication shortened.

Timothy F Geithner: The current financial challenges – policy and regulatory implications Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Council on Foreign Relations Corporate Conference 2008, New York, 6 March 2008. *  *  *  I am going to talk today about some of the challenges facing the U.S. and financial system. These problems took a long time to build up, and, even with a forceful mix of public policy and action by the private sector, they will take time to resolve. The central questions are: what caused the crisis and what explains its severity? What mix of policy measures will best contain the damage? And what changes to the financial system are likely to produce greater stability and resilience in the future? Origins The origins of this crisis lie in complex interaction of number of forces. Some were the product of market forces. Some were the product of market failures. Some were the result of incentives created by policy and regulation. Some of these were evident at the time, others are apparent only with the benefit of hindsight. Together they produced a substantial financial boom on a global scale. In the five years leading up to the present stress, the world experienced an unusual mix of financial conditions.
For a start, we can rightfully boast that as a country we have achieved single digit inflation for the second year in a row and we have had no financial institution failures in the recent past. These successes are the result of monetary and fiscal policies that have changed the economic landscape of Zambia. We have been fortunate that the successes have come at a time when we are seeing renewed economic interest in Zambia. Investments in mining and other sectors have significantly increased, and more importantly, the Eastern Province has not been left out. Ladies and Gentlemen, we have been following the developments in Eastern Province with keen interest; hence our visit to see for ourselves what is going on. I must say that we are impressed with what we have been able to find out. It is clear that income levels have risen in the region and this has been driven by the boom in agriculture. This is an encouraging development. One of our primary concerns as policy makers is to ensure that development is not restricted or concentrated along the line of rail. We therefore urge you to use your enhanced income levels to invest in capital equipment so that your productive bases are sustainable. As a country, we are blessed with land and water resources. However, it is only in the recent past that we are beginning to see the value of what we have through improved agricultural output.

Jaime Caruana: Reform of the international standard for bank capital Notes for the testimony by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, before the Committee on Economic and Monetary Affairs, European Parliament, Brussels, 18 January 2005. * 1. *  *  Introduction  I am honoured to appear before the Committee on Economic and Monetary Affairs today to discuss the reform of the international standard for bank capital. In past years, members of the European Parliament have kindly welcomed Bill McDonough, the prior Chairman of the Basel Committee, as well as other Basel Committee representatives. I would like to thank you for giving me this opportunity to contribute to the debate and to support your important work in considering the proposed directive on capital adequacy requirements for banks and investment firms. These hearings are extremely valuable and represent a vital stage in the European legislative process, where the European Parliament has a crucial role. I will be speaking today in my capacity as Chair of the Basel Committee. But I hope you will allow me to digress on one or two occasions to supplement my remarks with my perspectives as Governor of the Banco de España. The Banco de España is a central bank and banking supervisory authority within the European Union; it will therefore be a direct subject of the legislation that is enacted on capital adequacy.
Some countries are in a relatively favourable position because their past management was wise and prudent, while others are already very close to losing credibility. Spain – where fiscal consolidation had progressed more than elsewhere – will have to make sure that it keeps its fiscal credibility in the years to come in strictly meeting the requirements of the Stability and Growth Pact. A clear plan for a medium-term fiscal correction becomes even more pressing for rapidly ageing societies like ours, as an increasing numbers of pensioners will mean mounting claims on public transfers. IV. Conclusion  More than one year after the dramatic deepening of the financial crisis in September 2008, we can spot a number of signs of economic stabilisation in the euro area. We have halted the freefall in economic activity that we witnessed over a period lasting more than six months after the intensification of the crisis in mid-September 2008. But the crisis has debilitated the real economy. As I said, the crisis has proved so deep because it has deprived our citizens of confidence. Every business activity is by its very nature an act of trust, an expression of confidence. As regards bankers, by granting loans more actively to entrepreneurs they can contribute to transmitting and inspiring confidence to the economy at large. Being part of the euro area and the European Union will help in this process.

First, it will be centred around the European System of Financial Supervisors. The establishment of this System will permit better coordination among national authorities responsible for financial regulation. If one lesson can be learnt from the crisis, it is that the reach of financial supervision and regulation needs to be extended to better monitor those financial institutions, including highly leveraged, which can arbitrage across national borders and across oversight jurisdictions. The European Systemic Risk Board (ESRB) will be the other dimension of the European approach to financial reform. This new body will provide early-warnings and issue recommendations that will help to prevent a renewed build-up of excessive risk in the financial system as a whole. The crisis has displayed the phase transition that risk can undergo almost overnight: a mutation from localised liquidity risk to a generalised solvency threat attacking the whole system of financial interconnections. The ESRB will have to oversee the likelihood and measure the severity of these reactions and instant transmissions. The ECB and the National Central Banks in the EU will fully contribute to this new institutional framework. Global governance The underlying approach to reforms should be holistic. The global proportions of the crisis call for a rethinking of the links between financial behaviour and macroeconomic policies, as they interact in a global scene. 4  BIS Review 150/2009  The G 20 has made a quantum leap in creating the new premier global economic group.
Weaker institutional and regulatory frameworks have added up to make these economies historically associated with increased cyclical vulnerabilities. The procyclicality of bank credit and debt-driven fiscal expansions, together with more rigid exchange rate regimes, contributed in the past to amplify external shocks, making exposure to changes in external financial conditions a relevant driver of overall economic activity. Because of these vulnerabilities, EMEs are often considered a risky-asset class. As such, investment flows pour into them when global conditions improve and risk-on is the mood in the market—be it through international banking linkages or direct portfolio flows. Domestic asset prices surge more vigorously in response to these flows due to limited financial market depth, strengthening the market value of firms’ collateral and further contributing to the buildup of vulnerabilities. Two factors have been especially critical in the past. First, the so called “original sin”, whereby EMEs—especially governments—fund themselves in foreign currency, creating foreign exchange (FX) mismatches in balance sheets of the government, banks, or corporations. Second, procyclical fiscal and monetary policies that amplify external shocks. In such cases, even a mild external shock can push economies to the brink of recession. ∗  I thank the comments and suggestions in preparing this note to Elías Albagli, Miguel Fuentes, and Carlos Medel. 1  In short, domestic weaknesses interact with global financial attitudes in a dangerous mix that has historically proven to be highly destabilizing for EMEs, compared to AEs.

It is true that there is currently some euro-skepticism and a surge of populism, but, [slide] a clear majority of euro area citizens support the euro today. This is the case in all member states despite the severe economic downturns that some countries have experienced. From 12 at the start, the number of participating countries has risen to 19 today. 7 additional countries have decided to join the euro since 1999 – the most recent one being Lithuania in 2015 –, and none has wanted to leave it. The euro is not a technocratic utopia: it is a political and democratic decision, supported 25 years on, with hindsight, by a clear majority of citizens. Economic and institutional foundations  1/6  BIS central bankers' speeches  Our foundations are partly political; but the European edifice has also sound economic and institutional foundations. When reflecting on the euro at Columbia University, the first thinker who comes to mind is naturally Robert Mundell and his theory of Optimal Currency Areas which has been used by numerous economists to analyse the European Monetary Union and its chances of success. Mundell himself has remained an ardent supporter of the euro.1 He put forward a number of theoretical arguments to respond to the critics – including financial integration and capital mobility –, although recognising that the EMU remains suboptimal (like, to some extent, the American monetary union).
By addressing these issues, the stress tests implemented by the Federal Reserve in the United States, and by the European Banking Authority in Europe, could play a key role in re-establishing confidence in the banking system. Reputational risks in tail events The second category of contracts we want to examine can be put into more of a game theoretic framework, where the perceived pay-off in the tail event is offset by “unforeseen” costs. In this section, we are focusing on behaviour that, at first glance, may seem irrational, but is best understood as being driven by classic time inconsistency. In particular a market participant may voluntarily choose not to enforce a contract that is “in the money”, if the reputational repercussions are perceived to cause more damage than whatever could be gained financially by enforcement. During the crisis, banks moved a significant amount of their mortgage-based assets offbalance sheet into Structured Investment Vehicles (“SIVs”). Most of the funding for these SIVs came from publicly sold asset-backed commercial paper (“ABCP”) and other mediumterm notes (“MTN”). There was a small amount of equity in the form of a junior “capital note,” which split the excess return with the asset manager. From their invention by Citigroup in 1988 and until the crisis, there was sufficient spread between the assets and the funding to generate a reasonable return to attract investors to buy the capital notes. In addition, there was typically a partial liquidity back-stop facility provided by the originating bank.

See also Northern Rock’s 2008 Annual Report and accounts P25/6. BIS central bankers’ speeches  7  large. Introducing a break clause allowing either counterparty to terminate the contract effectively shortens the maturity of the swap, since the bank (or the company, in case it is owed money and the bank’s credit appears more shaky) can demand payment at that time. In reality, most corporates do not expect such a break clause ever to be exercised. The concern would be that, if the corporate expects the bank to ignore the break clause regardless of the circumstances, exercising the clause would be a surprise for which the firm may not have put appropriate contingencies in place – perhaps even making default more likely. Or that the market may start to interpret the enforcement of “break clauses” as a sign of weakness on the bank’s part. In other words, such behaviour could be seen as so antagonizing to customers that a bank would only do it if it is absolutely desperate. Yet if the bank cannot in fact enforce the break clause, its credit pricing and risk management has been faulty. Another example, comprising elements of the break clause and the SIV problem, is the behaviour of managers of money market funds when faced with the prospect of “breaking the buck”. A money market fund calculates its net asset value (NAV) on a daily basis. The NAV is its price per share, which reflects the total value of the fund’s investment holdings.
Cash in the form of banknotes and coins does not accrue any interest for the holders. The general public’s holdings of banknotes and coins are entered into the Riksbank’s balance sheet as an interest-free liability. The Riksbank invests a corresponding amount, with a deduction for the cost of managing banknotes and coins, in yield-bearing financial assets. This equivalent amount is in practice part of the foreign currency reserve. The return the Riksbank receives on these financial assets comprises what is known as seigniorage income. In 2008 seigniorage income amounted to around SEK 5 billion, which corresponds to a return of 4.6 per cent. 12  BIS Review 160/2009  Figure 13 Banknotes and coins – monetary base SEK billion 450  450 Riksbank Certificates Fine-tuning Banknotes and coins  400  400  350  350  300  300  250  250  200  200  150  150  100  100  50  50  0  0 Jan-08  Apr-08  Jul-08  Oct-08  Jan-09  Apr-09  Jul-09  Oct-09  Source: The Riksbank. Another concept that has been discussed to some extent in connection with the financial crisis is what is usually known as the monetary base. This consists of banknotes and coins in circulation plus the banks’ deposits with the Riksbank through Riksbank Certificates, finetuning and standing facilities. During the financial crisis the banks’ deposits with the Riksbank increased substantially, as mentioned earlier, when the Riksbank increased its lending to the banks.

1  The monetary policy counterparties consist of 14 banks and the restricted monetary policy counterparties are currently Svensk Exportkredit, Kommuninvest i Sverige, Sparbanken Finn and Öhman Fondkommission. 8  BIS Review 160/2009  The Riksbank’s lending in dollars has been funded by using the foreign currency reserve and through loans from the US central bank. I will return to this later. The interest rate for the dollar loans has been determined through a premium on the short-term interest rate on dollars in the United States. The Riksbank has paid the same interest rate to the US central bank. The Riksbank’s dollar lending peaked in the spring, but has now come to an end (Figure 9). Figure 9 The Riksbank’s lending in dollars and its funding SEK billion 300  200  300  Swap agreement Foreign currency reserve Dollar lending  200  100  100 lending  0  0 funding  -100  -100  -200  -200  -300 Jul-08  -300 Oct-08  Jan-09  Apr-09  Jul-09  Oct-09  Source: The Riksbank. The Riksbank makes a profit on the loans and deposits, through its interest rates. The total profit for the Riksbank during the period from the beginning of October 2008 to the end of October 2009 amounts to around SEK 2.3 billion. The fact that the Riksbank makes a profit on its lending and deposits in kronor is not the purpose of these measures, but rather a sideeffect.