samchain/econo-pairs-v1 huggingface dataset:
Niklaus Blattner: System stability and monetary policy Summary of a speech by Mr Niklaus Blattner, Vice-Chairman of the Governing Board of the Swiss National Bank, at the University of Berne, Berne, 31 January 2006. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  For a number of years the Swiss National Bank (SNB) has been devoting considerable attention to the interaction between system stability and monetary policy. The aim is to arrive at an assessment of the current situation. The results obtained so far have been very useful, but there is still work to be done in implementing them and developing them further. Our point of departure is an analysis comparable to that presented in the 2005 Annual Report of the Bank for International Settlements (BIS). From basic research papers published by the BIS we can conclude that, where financial systems are liberalised, a monetary policy that responds exclusively to short-term risks to price stability will promote the elasticity of economic systems. Only if monetary policy also responds to cumulative disequilibria in financial markets can this elasticity be limited. A monetary policy response of this kind can be achieved through coordination with macroprudential and microprudential instruments. With this in mind, we turn to the activities of the SNB. The primary objective of the National Bank’s monetary policy and its contribution to the stability of the financial system is to supply the economy with liquidity.

Zeti Akhtar Aziz: Better supervision and better banking in a post crisis era Welcoming address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Financial Stability Institute (FSI) – Executive Meeting of East Asia Pacific Central Banks (EMEAP) High Level Meeting Dinner, Kuala Lumpur, 16 January 2011. *  *  *  It is my pleasure to welcome you to this Financial Stability Institute (FSI) EMEAP high level meeting for Banking Supervisors. Bank Negara Malaysia is honoured to host this event that brings together senior officials from the regulatory community, as well as, the leadership from the banking industry from the Asian region to discuss Supervision and Banking in this post crisis era. We are now in a period of profound and fundamental change for the industry and for regulators and supervisors. The issuance of the final reform package by the Basel Committee in December 2010 marks the completion of a key milestone in the international financial reform process that began in the aftermath of the global financial crisis. This process has been complex, involving multiple tracks of intense dialogue taking place, both at the international and regional levels. The journey towards building a more resilient international financial system, however, is far from over. For this set of reforms that have been issued by the Basel Committee, the next phase involving the implementation will be equally challenging. There is already great anticipation on how the new standards would be phased in, and its impact on the financial sector landscape.
There will be deviations from these forecasts, even if they are well founded, partly because the economy is hit by  BIS Review 14/2002  1  unforeseen shocks from time to time. If fruit-growers' crops are attacked by insects, the price of apples will rise, if the dams are not filled with water, electricity prices may rise, and if cows in Europe suffer various diseases, the price of meat and certain other foodstuffs rises. If the Riksbank tried to make corrections for this type of temporary price disturbance, it would probably lead to large swings in monetary policy and unnecessary fluctuations in demand. It would therefore be wrong to give the impression that inflation will always lie at 2 per cent. On the other hand, it is important that the Riksbank constantly adapts the instrumental rate to ensure that the inflation forecast 1-2 years ahead is in line with the inflation target. This means that households and firms can rely on temporary deviations above or below this level being just temporary. One factor that could seriously undermine the credibility of the inflation target is if a higher rate of price increase led to large-scale demands for wage compensation. If wages and prices begin to chase one another upwards, as happened in the 1980s, everyone will lose out in the end. The importance of monetary policy for growth and vice versa The importance of monetary policy for growth is primarily connected to the need for stability in trade and industry and the labour market.

The Swedish market is too small for companies from other countries to find it profitable to manufacture products especially for us. There may therefore be reason to consider how competition legislation may have greater effects in practice. Increased competition benefits the economy in two ways: by initially contributing indirectly to lower inflation and by stimulating efficiency and new ways of thinking. I believe that one of the problems with the competition legislation may be that the incentives to follow the law are too weak. It is always individuals (company managers, owners) who prepare and make decisions on limiting competition against the provisions of the law, but there is little personal responsibility in the current legislation. Merely sentencing the companies to fines risks creating a situation where it is ultimately the consumers that have to pay a second time; first the cartels' higher prices and then the cost of the cartels' fines. In the USA, it is the responsible decision-makers that are penalised when breaches of the law come to light. The Swedish Competition Authority expresses the opinion in its response to the report by the committee on combating cartels (SOU 2001:74) that the possibility of personal penal responsibility should be considered in Sweden. It makes comparisons with other economic crimes that lead to prison sentences. Increased mobility for ideas, goods, services, work and capital during the 1990s, partly through our membership of the EU, has probably also had a positive effect on growth.
At the same time, I believe this would presuppose a reasonably balanced economic situation in Sweden, with strong confidence in economic policy, as well as broad political support for ERM2 membership. While there may be some cause for concern about conflicts between an exchange rate target in ERM2 and the direct inflation target, this risk should not be exaggerated. The broad bands for the exchange rate mechanism, together with experience in other countries in the run-up to the monetary union, show that no serious conflicts need arise. If market players are confident that the central rate in ERM2 will be chosen as the conversion rate for participation in the euro area—as they have every reason to be in that this was the case for each of the 5  BIS Review 48/1999  eleven countries that currently make up the monetary union—then the krona’s market rate is unlikely to deviate all that much from its central rate. This was clearly the case for the currencies that have already been converted into euro. Once it was clear, for example, that Finland would be joining the euro area, the markka remained stable and very close to its central rate. In practice this would mean that during ERM membership, Swedish interest rates with relatively long maturities would converge on the levels that apply in the euro area. As the date for joining the union approaches, the very short market rates would be increasingly affected.

Their behaviour in this respect is more reminiscent of how the Riksbank acted in the early stage of the flexible exchange rate regime. The operations of other central banks, in the UK and Australia, for instance, are more akin to the Riksbank’s current practice. Comparisons of exchange rate fluctuations in different countries with a flexible exchange rate provide little evidence of any clear effects from differences in the monetary policy strategies. The Canadian dollar, for example, does not seem to have been more stable even though the Bank of Canada has focused more on the monetary conditions and made greater use of interventions. BIS Review 48/1999  2  Forces behind the flexibles exchange rate At the time of the departure from the krona’s fixed exchange rate in November 1992, the real tradeweighted exchange rate was overvalued. Inflation in Sweden had been higher than elsewhere for a considerable period and this had successively eroded competitiveness. When the flexible regime was introduced, the krona depreciated markedly; in the first six months the nominal TCW index weakened about 20 per cent. In that inflation in Sweden had already been brought more or less into line with the rest of the world and there were signs of expectations that it would remain relatively low, such a marked nominal depreciation exceeded what was needed to restore a reasonable competitive situation. Having previously been overvalued, the real exchange rate accordingly swung abruptly to an undervalued level and remained there for a long time.
The  BIS Review 30/2009  1  combined effect now is a painful deleveraging process that drives down asset prices, shrinks balance sheets, and feeds straight into the real economy in the form of credit contraction. Adverse feedback loops between the financial system and real economy have become entrenched. The Eurozone, which accounts for the second largest share of global GDP, has deep financial linkages with the US. Through these linkages, financial stresses were transmitted across the Atlantic rapidly. Many banks in Europe, as well as other financial institutions such as insurance companies and asset managers had large exposures to US assets. Many were over-leveraged and dependent on benign conditions for liquidity to continue flowing. So they got sucked into this vortex. We have a similar story of credit evaporating and strains being felt in the real economy. Over in Japan, recovery from a decade of economic growth stagnation has been derailed by the collapse of external demand with serious knock-on effects on domestic activity. Japan’s capacity to support the growth of other advanced and emerging economies is now diminished. So a global recession is now upon us. The three economic giants – the US, Europe and Japan – together accounted for just over 50% of global GDP in 2007. All three cylinders are sputtering. The impact has already been felt worldwide. How long and how deep this recession will be is still an unknown, though many economists are predicting a long L-shaped trajectory.

Heng Swee Keat: The impact of the global financial crisis on Asia Keynote speech by Mr Heng Swee Keat, Managing Director of the Monetary Authority of Singapore, at the International Institute of Finance (IIF) Asia Regional Economic Forum, Singapore, 4 March 2009. *  *  *  Introduction Ladies and Gentlemen, Good afternoon. I welcome the International Institute for Finance (IIF) for holding its Asia Regional Economic Forum in Singapore. It is good to see such a diverse group gathered here for this Forum. An unprecedented crisis The most commonly used adjective to describe the current financial crisis is "unprecedented". Indeed, many aspects have been exceptional – •  the speed at which events unfolded and triggered a series of domino effects;  •  the scale of the impact, which has become global; the range of financial institutions and investors affected;  •  the near-perfect correlations of markets and asset classes that had been uncorrelated when conditions were benign;  •  and the range of unconventional measures taken by financial authorities globally to try and arrest the unfolding crisis. These features of the crisis are exceptional. But perhaps the most crucial aspect that has had a profound effect on the dynamics of this crisis and its impact on emerging economies, is that unlike various past crises, this current crisis originated in the US.
Mugur Isărescu: Monetary policy during transition. How to manage paradigm shifts Presentation by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the Annual Conference of the European Association for Banking and Financial History, organised by the European Association for Banking and Financial History and the National Bank of Romania, Bucharest, 7–9 June 2012. *  *  *  Ladies and Gentlemen, I started my career back in August ’71, the day after President Nixon announced the suspension of gold-convertibility of the US dollar and the introduction of a 10 percent surcharge on American imports, thus marking the dismantling of the Bretton Woods System. We all know what happened next: in an attempt to preserve a system of fixed exchange rates, the Smithsonian arrangement – which set a fluctuation band of +/–2.25 percent – was introduced in December 1971. It only lasted for six months, so that during 1972–73 fixed exchange rates were replaced by floating regimes in most economies around the world. Exception made the countries of the European Economic Community, which decided to implement a joint floating arrangement and introduced rather funny concepts such as the “snake in the tunnel”. Those were also years of intellectual controversy – I remember reading alternatively the Newsweek articles of Samuelson and Friedman, one preaching the virtues of Keynesian policies, while the other praised free markets and non-intervention. I witnessed the end of an era and the dawn of another.

Nevertheless, it is worth noting that, when Romania gave up monetary targeting, Estonia was its only peer among Central and East European countries in terms of longevity of the  2  BIS central bankers’ speeches  monetary policy regime, with its currency board adopted in 1992. Shifts from one end to another of the spectrum of monetary and exchange rate arrangements were common in the region. Specifically, the Czech Republic, Poland and Hungary had various forms of exchange rate pegs during the nineties, before shifting to inflation targeting. As for Romania, the transition between the two regimes was smoother, since the monetary targeting framework included elements such as the disinflationary stance, exchange rate flexibility and, of course, the major role of monetary aggregates, which are also seen in the inflation targeting regime. Amid the never-ending, heated debates on rules versus discretion in monetary policy, which are so time- and energy-consuming in the academic world globally, inflation targeting may be viewed as an attempt to make both ends meet. This strategy has the merit of combining tight constraints in terms of the final objective (the inflation target) with a certain degree of discretion as regards the calibration of monetary policy instruments so as to provide an adequate response to shocks. While theoretical orthodoxy used to claim that inflation targeting needs a free floating currency, in practice, many inflation targeters opted for a light version of the strategy. So did many Marlboro smokers.
The two forecasts are very similar for 2006, and show receding rates of inflation due to the fact that oil prices are not increasing any further. As of 2007, the new inflation forecast lies below the previous one. This reflects the dampening effect of today’s interest rate decision on future inflation. The forecast shows that there is no immediate inflation risk. At 0.8% and 1.2% in the coming two years, the expected rates of inflation remain low. However, it is evident from the inflation dynamics that, even with a three-month Libor of 1.0%, monetary policy has an expansionary effect. With today’s decision to increase the three-month Libor by 25 basis points, we are adhering to our previous monetary policy course. We continue to support the economy, using the leeway available to us. This should guarantee price stability in the longer term. If the Swiss franc appreciates rapidly, the National Bank will respond appropriately, and is keeping all its options open for such an eventuality, as it has in the past. Observed inflation December 2005  BIS Review 86/2005  3  Inflation forecast of September 2005 with Libor at 0.75% and of December 2005 with Libor at 1.00%  Inflation forecast of December 2005 (57 kb)  4  BIS Review 86/2005

Policy Moreover, the policy implications of Shleifer’s paper are arguably rather different from those stemming from theories that attribute the crisis solely to bankers acting rationally in response to the private incentives created by remuneration packages and the problem of Too Big To Fail. In that sense, Shleifer’s model formalises the argument of Charles Goodhart and others that bankers badly misjudged the risks rather than consciously ran the system towards the edge of the cliff. One policy implication of myopia is that, as Shleifer himself says, we need to attend to risks beyond banking – in shadow banking etc. I spoke about that around this time last year.6 We need policies on firms and funds that perform similar economic functions to banking, such as money funds; as Shleifer says, the constant-net-asset-value basis of most money funds encourages a belief that they are riskless, and yet in fact they are not insured and carry no capital. We also need policies on markets that deliver maturity transformation and leverage. This crisis happened partly because the authorities did not keep up with developments in capital markets. I shall not revisit that in detail this evening, other than to say that the Bank is glad that its new Financial Policy Committee will have a responsibility for advising HMG when to move the perimeter of microprudential supervision and a power to make Recommendations to the securities regulator on rules governing funds and markets where they are material to stability.
In a Taylor rule, such benchmarks are pinned down mainly by the deviation of inflation from target and by a measure of economic slack. On this basis, observers held central banks accountable for monetary policy decisions, as the relation between policy objective and instrument is transparent and not equivocal. In a nutshell, empirical regularities lay the ground for a prescriptive monetary policy rule – even though oversimplified – against which central bank actions can be evaluated. In crisis times, it turned out to be nearly impossible to track the monetary policy stance using a Taylor rule. First, with the interest rate having ceased to be the main instrument, incorporating balance sheet measures into the rule is not straightforward at all.. Second, as the transmission of policy interest rates to the economy has been impaired, their comparison with Taylor rule benchmarks has become much less informative. Third, in view of persistently weak and low inflation and a high degree of economic slack, Taylor rules might well prescribe the setting of interest rates below their effective lower bound, wrongly indicating a tight policy stance, as the easing effects of unconventional measures cannot be accounted for. Developing other comparatively simple monitoring tools has not been possible. Overall, the ability of observers to use policy rules to hold the ECB accountable has been severely hindered. How can we then be sure that the measures taken fall within the ECB’s narrowly defined price stability mandate?

Hence, a front-loaded monetary tightening was implemented in the same period, which compensated for the distortion in inflation expectations. As of August, we decided to enhance the predictability of the Turkish lira liquidity policy in order to limit the impacts of global monetary policy uncertainties on the domestic economy. To this end, we adopted a strategy of reducing interest rate uncertainty by creating a framework where the relationship between global interest rates and domestic interest rates has largely weakened and market rates have become more sensitive to domestic macroeconomic developments as they should be. BIS central bankers’ speeches  1  In the third quarter, we continued to provide the market with foreign exchange liquidity via foreign exchange selling auctions, which fed into the growing Turkish lira liquidity deficit in the market (Chart 3). We cut the share of one-week repo in total funding in this quarter, which led to an increase in the share of funds from overnight and monthly lending facilities. Correspondingly, the CBRT’s average funding rate and the BIST interbank overnight repo rate increased (Chart 4). Moreover, in line with its strategy of enhancing the predictability of liquidity management, we have been sharing more information about the frequency and timing of the additional tightening since August. Recently, due to our cautious monetary stance, the Interbank Repo Market rates have been mostly hovering between 6.75 and 7.75 percent.
The first dimension of these challenges concerns efficiency. So  2  BIS Review 39/2006  far, much has been done in order to create a harmonised regulatory framework that provides a more level playing field and reducing the regulatory burden on financial institutions by creating European passports for financial services, improving supervisory cooperation and convergence, etc. The second dimension, which I will concentrate on today, concerns financial stability. More specifically, I will focus on the challenges pertaining to our ability to manage financial crises in Europe. The increased risk of cross-border contagion means that it seems less likely that the next financial crisis in Europe will be contained within national borders, and much more likely that it will have far-reaching consequences in a number of countries. This basically means a greater need for coordination of information and decision-making between authorities in different countries. In a crisis situation it is important to know who will do what and when. Things can be seriously complicated by the existence of a number of potential conflicts of interest between the different countries involved. Moreover, as the actions of one authority could have effects on other countries’ financial systems, there are some obvious accountability concerns. The national authorities are only accountable to their respective national governments and ultimately their constituencies. The fact that integration of the banking sector started relatively early in the Nordic and Baltic countries means that we have encountered some of these challenges perhaps a little earlier than many other European countries.

According to a study by Hoggarth et al, the average drop in GDP following a financial crisis is 15-20 percent. The social costs from a banking failure can thus be substantial and involve many countries in various degrees. This, in turn, will most certainly have the effect of giving rise to difficult negotiations on how burdens should be shared between the countries involved. The larger the banking group, the more countries that are involved in its cross-border activities, and the more important the bank is to the functioning of the financial system in a country, the higher the stakes will be for individual countries and the trickier and tougher the negotiations will be. But why is this relevant in a crisis management perspective? Couldn’t we just go about and deal with the most urgent phase of a crisis first, and take care of burden sharing later, when we all know the facts? In my opinion, we cannot afford to wait that long. Uncertainty about the distribution of social costs in the event of a cross-border banking bankruptcy can seriously hamper the ability to act in an emergency situation. In particular, there is a risk that crisis management will be held up by a negotiation game between nations unless there are some previously made arrangements for burden sharing.