samchain/econo-pairs-v1 huggingface dataset:
Given what we have experienced in the last two years, it is my hope that the international community will see the wisdom of not waiting for the next crisis to learn how we can make the international financial system a more robust and safe one for all of us.” 3. Ladies and Gentlemen, I made the above remarks over 10 years ago, in June 1999. It was ten months after the Asian Financial Crisis hit Hong Kong, which was then followed by the turbulence of the global financial system as a result of the abrupt collapse of the LTCM. It was rather unfortunate that the fear I expressed in 1999 has come true ten years later. The international community has failed to learn the lessons from the Asian Financial Crisis and the LTCM debacle and to make the financial system more robust and safer. As a result, we have been punished, and punished very, very severely. The latest Financial Tsunami, dubbed as “Once in a Century”, has demonstrated that somehow all the key safety valves and gatekeepers have failed functioning properly to prevent excessive leverage and risktaking within the financial system, leading to very heavy fiscal and social costs in the subsequent bail-outs. 4. Now the international community, led by G20, is trying very hard to draw lessons from this latest financial crisis. I sense that there is a very strong resolve to do something this time round.

William C Dudley: The outlook, policy choices and our mandate Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Society of American Business Editors and Writers Fall Conference, New York City, 1 October 2010. *  *  *  The deep recession that ended in June 2009 has been followed by a very tepid recovery. Economic activity has grown – but only slowly from levels far below the productive capacity of the economy. With demand growth barely keeping pace with firms’ ability to increase productivity, job creation has been too weak to significantly reduce unemployment, which stands today at 9.6 percent. And, as is typical in such circumstances of considerable slack, the rate of inflation has declined. Viewed through the lens of the Federal Reserve’s dual mandate – the pursuit of the highest level of employment consistent with price stability, the current situation is wholly unsatisfactory. Given the outlook that the upturn appears likely to strengthen only gradually, it will likely be several years before employment and inflation return to levels consistent with the Federal Reserve’s dual mandate. Today, I will discuss why the recovery has been disappointing and highlight some of the issues facing the Federal Reserve and monetary policy, echoing some of the themes laid out by Chairman Bernanke in his Jackson Hole speech in late August.
Svein Gjedrem: The conduct of monetary policy Introductory statement by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 23 May 2005. The  Charts in pdf-format can be found on the Norges Bank’s website. Please note that the text below may differ slightly from the actual presentation. The statement is based, among other things, on Norges Bank’s Annual Report for 2004, Inflation Report 1/2005 and the assessments published after the monetary policy meeting of the Executive Board on 20 April. *  *  *  I would like to take this opportunity to thank the Storting for again inviting me to appear before this Committee on behalf of Norges Bank in order to report and answer questions on monetary policy in connection with the Storting’s deliberations on the Government’s Credit Report. The introductory statement is based on the Bank’s Annual Report, but is also updated based on the Executive Board’s assessments for the period to the preceding monetary policy meeting. Flexible inflation targeting Monetary policy in Norway is oriented towards low and stable inflation. This is the most important contribution monetary policy can make to sound economic developments in the long term. The inflation target provides enterprises and households with an anchor for future inflation expectations. When there is confidence in the inflation target, monetary policy can contribute to stabilising developments in output and employment.

One approach to this challenge would be for the Bank to return to basics and improve the three channels of financial intermediation, namely, banking, equity and debt, through a number of measures. First, the Bank could increase investment in the financial infrastructure in Asia. Just as physical infrastructure, such as airports and highways, facilitates the movement of people and goods, financial infrastructure, such as the payment and settlement systems for the banking and securities sectors, facilitates the safe and efficient movement of money. The importance of a robust payment and settlement system in this region is underscored by the events of 11 September. Secondly, the Bank could expand the technical assistance programme to assist economies in restructuring the banking sector. Small and medium-sized enterprises employ the most workers in Asia and they are mostly dependent on bank financing. The banking sector in Asia, devastated by the Asian financial crisis, has not fully recovered. Banks understandably are adopting a very conservative lending strategy towards companies with a lower credit rating, such as Small and Medium-sized Enterprises. The Bank’s assistance in speeding up the banking sector reform would help SMEs to get back on their own feet, thereby reducing unemployment and poverty. Thirdly, the Bank could expand assistance in building up the institutional capacity of individual economies to improve corporate governance in the private sector. Emphasis should also be made to improve the auditing, disclosure and transparency standards of publicly-listed companies.
Unemployment in the EU and the euro area has reached historic levels, especially amongst the youth. Economic growth is weak and is mainly concentrated in central countries of the euro area. Our countries have been affected by this situation for objective reasons. Trade relations, movement of capital and workers, and the financial system are channels that pass these problems on to our economies. The form, size and extent of this impact have evolved over the past four years. At present, the situation is reflected in the decrease of domestic demand, decline of economic growth, reduction of available income, loss of confidence and deterioration of optimism; this is, in turn, reflected in higher savings. Consequently, these developments have placed the focus of economic policies towards economic activity and revitalisation of optimism in order to boost investments and consumption. On the other hand, maintaining financial stability becomes a necessity, creating thus a binomial of priorities that condition each other and require a simultaneous solution. The Albanian economy is increasingly facing the challenge of economic growth. Although the Albanian economy enjoys consolidated macroeconomic stability and sound financial foundations, aggregate demand has been weak during the first nine months of 2012. Both domestic and foreign demand suffer from high uncertainty, relatively tight lending standards, and limited space for discretionary and stimulating policies.

Consequently, it would convert the tendency of the region to be negatively contaminated from global developments into an opportunity, a positive impact, in order to achieve high and stable economy growth in the long run. Thank you! BIS central bankers’ speeches  3
The survey consisted of an electronic questionnaire sent to 354 members of the SBE. 141 replies were received, a response rate of 40%.12 Over 85% of respondents said that forming a view of interest rate prospects was important to them. For those of us who have continually argued that the news on interest rates stems from developments in the economy rather than meetings of the MPC, it is heartening that, collectively, you place more weight on economic data than on MPC communications in forming a view of interest rate prospects. Respondents were asked to allocate a total of 100 points across the categories of information in terms of how useful they were in forming such a view. Twice as many points were given to economic data as to MPC communications, especially at the longer horizons – see chart 9. And the weight on data was divided roughly equally between financial data, official data on real activity, official figures for costs and  12  6  The full survey is to be published in the next issue of the SBE’s journal, the Business Economist. BIS Review 43/2007  prices, and business and consumer surveys. So the argument that the MPC responds to developments in the economy has been largely understood. This is welcome news for those of us who wish to be boring. So far I have talked only about the past – the performance of the UK economy and the behaviour of the MPC since 1997. What of the future? 3.

A number of processes, such as those concerning government finances, are being modified. But this is accompanied by an increased need to discuss issues raised by the fact of monetary union. Now that the countries which will be participating initially in monetary union have been singled out, moreover, an informal group - the Euro 11 Group - is being set up for discussions among the ministers of finance and economy in the euro area. The idea is that this group will concentrate on matters that concern just the participating countries and cater to the greater need for dialogue and cooperation that they perceive in connection with the inception of monetary union. However, this is not a decision-making body and all matters considered by Euro 11 are prepared by the Monetary Committee, in which all fifteen EU Member States are represented. The crucial institutional change is, of course, that as of next year the conduct of monetary policy will be fully centralised. The Treaty explicitly states that the ECB is not to be swayed by political considerations; its task is to concentrate on monetary policy. But naturally a dialogue will be needed with the governments in the EU and euro areas, in the first place with the ministers of finance and economy. The Treaty actually provides for this in that the Ecofin president may participate in meetings of the ECB Governing Council and even submit motions. Moreover, representatives of the NCBs and finance ministries will continue to meet in the Economic and Financial Committee.
In this connection, I shall begin by discussing how supervisory structures have developed in the main European countries; next, I shall refer to the changes brought on by the banking union; and finally, I shall conclude with some comments on the Spanish supervisory model. The organisation of supervision in the European countries Financial supervision pursues numerous aims, encompassing the safeguarding of financial stability, the proper functioning of securities markets and investor protection. These aims are linked to specific functions such as oversight of the solvency position and liquidity of banks, insurance companies and other leveraged institutions whose activity involves risk transformation; and monitoring of the conduct of institutions, intermediaries and other participants in the markets for financial products and services. Recently added to these functions are the so-called macroprudential policies, geared to the containment of macro-financial risks, and the management of orderly resolution procedures for systemically important institutions. The adoption of a model of supervisory organisation involves defining a certain number of supervisory agencies and assigning to each of them a specific scope of action, clearly defined objectives and the instruments needed to achieve them. Historically, the models chosen have been the result of the assessment by the authorities of elements such as the structure of the supervised sector, the need to ensure a sufficient institutional efficiency, harnessing the synergies between different supervisory tasks, or the need to forestall the emergence of potential conflicts between the objectives assigned to a single agency.

Moreover, although the ECB’s supervisory decisions are formally adopted by its Governing Council – which also defines monetary policy – these are prepared and pre-agreed by an independent Supervisory Board, meaning that the Governing Council acts only under the principle of non-objection. Hence, when defining the institutional model of the banking union, the European legislator has set great store by preventing conflicts of interest between micro-and macroprudential supervision and monetary policy, on one hand, and between supervision and bank resolution, on the other. The aim is to mitigate the risk of monetary policy, geared to maintaining price stability, being tainted by considerations relating to financial stability, and to separate as far as possible the policies aimed at preventing solvency crises, which are pursued by the Single Supervisory Mechanism, from those geared to managing such crises, which are the remit of the Single Resolution Mechanism. The appropriate functioning of this model, based on the principle of separation, nevertheless requires the intense cooperation and coordination of the different authorities involved. In the case of the interaction between monetary and prudential policies, the necessary cooperation arises from the complementarity, at least in the medium term, between macroeconomic stability and financial stability and, above all, from the potential impact of the instruments available in one area on the objective pursued in the other.
However, I believe that it will be important to monitor developments in the period ahead to check that new risks do not arise. Figure 11. Decline in lending to households Credit growth, annual percentage change 20  20 Companies Households  15  15  10  10  5  5  0  0  -5  -5  -10  -10 99  01  03  05  07  09  11  Source: Statistics Sweden  Conclusions Today, I have discussed three aspects that were particularly important to my assessments and my stance when the repo-rate decision was made in February. Two of these relate to the debt crisis in the euro area. My view is that it is taking too long to improve public finances and that the risks associated with a high level of indebtedness mean that the debt-ridden countries themselves must assume a greater responsibility for resolving their problems. The third aspect relates to the risks that can arise when the real interest rate is low for an extended period of time. This can, for example, lead to overheating tendencies or a too rapid increase in indebtedness. My conclusion is that, in the current situation at least, these risks are limited. This was one of the important reasons why I was able to vote for a repo-rate cut at the latest monetary policy meeting. A lively public debate is currently underway on a couple of the issues I have addressed here.

Percentage change from previous year 8  8  7 6 5  7  GDP Mainland Norway Employment  6  Average 1990-2001 = 2.8%  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001  Source: Statistics Norway SG 240802  Correlation with world index.
Assuming constant returns to scale, perfect competition (so that factors of production are paid their marginal products) and Hicks-neutral technical change (so that shifts in the production function do not affect marginal rates of substitution between inputs), output growth can be expressed as a weighted sum of the growth rates of inputs and an additional term that captures shifts over time in the production technology. The weights for the input growth rates are the respective shares in total input payments – the labour and capital shares. More specifically:  where A(t) is a multiplicative factor in the production function capturing technical change.  K ,  L represent respectively the capital and labour shares of income. Charts 8 and 9 look at the proportion of labour and physical capital employed by the financial intermediation sector in the UK relative to the whole economy over the past forty years. They follow a not dissimilar path, with both labour and capital inputs rising as a share of the whole economy for much of the period. The proportion of labour employed by finance rises by around 50% between 1977 and 1990, while the proportion of capital almost trebles from 4% to 12% over the same period. Financial liberalisation over the period drew factors of production into finance, both labour and capital, on a fairly dramatic scale. Perhaps the most striking development, however, is what happens next. These trends have not persisted during this century.

The period from the early 1970s up until 2007 marked another watershed. Financial liberalisation took hold in successive waves. Since then, finance has comfortably outpaced growth in the non-financial economy, by around 1.5 percentage points per year. If anything, this trend accelerated from the early 1980s onwards. Measured real value added of the financial intermediation sector more than trebled between 1980 and 2008, while whole economy output doubled over the same period. 2  BIS Review 95/2010  In 2007, financial intermediation accounted for more than 8% of total GVA, compared with 5% in 1970. The gross operating surpluses of financial intermediaries show an even more dramatic trend. Between 1948 and 1978, intermediation accounted on average for around 1.5% of whole economy profits. By 2008, that ratio had risen tenfold to about 15% (Chart 2). Internationally, a broadly similar pattern is evident. In the US, following a major decline during the Great Depression, the value added of the financial sector has risen steadily since the end of the Second World War. As a fraction of whole economy GVA, it has quadrupled over the period, from about 2% of total GDP in the 1950s to about 8% today (Chart 3). Similar trends are evident in Europe and Asia. According to data from the Banker, the largest 1000 banks in the world reported aggregate pre-tax profits of almost $ billion in fiscal year 2007/08 (Chart 4), almost 150% higher than in 2000/01. This equates to annualised returns to banking of almost 15%.
To do this properly, we will have to work with international supervisors, regulators, and governments to achieve global solutions. On this score, lots of progress has been made in the credit default swap space – with several new CCPs likely to be up and running in months, if not weeks. But we can do much more in this area. •  We need an accounting and disclosure regime that allows investors to meaningfully ascertain the risks they are taking. For example, the same assets are often carried on different bank books at different prices. If you can’t trust the valuation marks on the assets, how robust can confidence be in the ability of the financial system to withstand stormy weather? •  We need a resolution mechanism for bank holding companies and non-bank financial institutions – legislation is needed here. Judging from the actions of the past year, there are indeed institutions that are “too big to fail”, at least in certain circumstances. Let’s set up a resolution framework that is robust and transparent so everyone understands the rules of the road and likely outcomes beforehand. An ad hoc approach increases uncertainty and reduces policymaker credibility. •  If large systemically important institutions are indeed too big to fail, then there needs to be an explicit quid pro quo for this. Otherwise, this implicit support will create moral hazard and discriminate against smaller institutions.

A mechanism such as the Vienna initiative that would encourage the commitment of parent banks to their EE subsidiaries and would discourage their financial disintermediation in these countries can be made permanent with added benefits to all the stakeholders. Furthermore, regulatory harmonization can be improved and regulatory arbitrage can be mitigated. On macro-prudential policies I argued on the need to develop specific anchors that would make more credible, transparent and therefore achievable the goal of financial stability. Measuring financial stability, or instability, might be difficult but that should not discourage us from trying. Thank you for your attention. Box 1 Measures taken in the banking supervision area during the pre-crisis period.   On June 2007, the new Law on Banks in the Republic of Albania entered into force. This Law stipulates rigorous principles and rules on the risk management, aiming at protecting the depositors, investors and fostering the banking system’s stability.   On January 2008, the Credit Registry started the operation representing a vital infrastructurerelated development.   On March 2008, the Bank of Albania adopted a package of regulatory amendments which were generally oriented to adopting more conservatory policies in several main directions of day-to-day commercial banking running. In more concrete terms, this therapy can be described:  In compliance with the new Law On Banks in the Republic of Albania, new quantitative thresholds were set for the calculation, supervision and reporting of banks’ large exposures to parent banks and related entities.
When a loan matures, it may therefore be tempting for a government to renege on its promise to repay the  3  See Carl August Fleischer (2005): Folkerett (International law). 4  Eduardo Borensztein and Ugo Panizza (2009): “The Costs of Sovereign Default”, IMF Staff Papers, Vol. 56, No. 4. BIS Review 123/2010  3  debt. In economic policy this is known as a time-inconsistency problem. It can be profitable to make lofty promises, but turn your back on them once you have cashed in the benefits. Why do countries not renege on commitments in stable times? We observe that they do honour their commitments, but the economic literature does not provide us with a good explanation for why this is the case. Countries want to preserve a good reputation. Governments that default do so in adverse times, but only after sharp fiscal retrenchment to avoid that fate. 3. Countries default more frequently than we believe  It is no new phenomenon that some countries live beyond their means and fail to settle the bill. History shows that many countries have defaulted on sovereign debts. This has occurred during emerging phases. From 1500 to 1900, Spain defaulted on its sovereign debt 14 times. 5 France defaulted nine times in the same period, while the states that later became Germany defaulted six times. England also defaulted once, but as far back as in 1594. (See Chart: Sovereign debt default.)

Given the proven track record of the two existing links, I am confident that the new link with the Thai Baht RTGS system will similarly be able to deliver reliable service to the banks in Thailand. As always, the HKMA stands ready to explore with our Asian neighbours opportunities for further collaboration in the area of financial infrastructure to promote regional financial integration and to help our markets cope with the challenges posed by the rapidly changing landscape of the global financial system. The implementation of this new PvP link demonstrates that both the Bank of Thailand and the HKMA fully recognise the merits and importance of cross-border co-operation to the promotion and maintenance of financial stability in the region. I believe that the solid partnership developed out of this project will open up new horizons for further cooperation between the Bank of Thailand and the HKMA in the future. Thank you. 2  BIS central bankers’ speeches