samchain/econo-pairs-v1 huggingface dataset:
Bandid Nijathaworn: Financial globalization and emerging market economies Speech by Dr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Panel Discussion, Bank of Thailand’s International Symposium 2008, Bangkok, 8 November 2008. *  *  *  First, let me thank the organizer for inviting me to take part in this panel. A lot has been said in the last two days about financial globalization and emerging markets. We spoke about the challenge for monetary policy, the challenge for financial regulation, and the implications for capital flows management, and on this panel, we discuss the importance of having the right international financial architecture to respond to the global challenge. But more important at this time, I think the current global financial turmoil also offers a unique and important perspective for us to look closely at financial globalization, in terms of the inherent risk, the lessons that can be learned, and how emerging markets should go about managing the process of financial globalization. My remarks today will be on the practical challenge faced by emerging market economies like Thailand in managing the process of financial globalization. On this, I will focus on the financial sector and the implications that financial globalization has for the financial sector in emerging markets. A good starting point to discuss the issue is to look first at the lessons that can be learned so far from the current turmoil.

Being pragmatic means having the right reservation about it, taking a careful step toward it, and be willing to take the needed action to deal with the unintended consequence. This is not going to be easy, but it is probably the best that we can do for now. Thank you. BIS Review 142/2008  3
The differences in this respect in relation to the United States, for instance, are fairly striking. The United States has had a more favourable development in unemployment, but quite a lot of this can be explained by the fact that labour force participation in the States has actually declined (see Figure 6). Of course, the relatively good development is not solely due to the monetary policy conducted by the Riksbank. Economic policy in general plays a large role, as does the fact that Sweden was not hit so hard by the crisis, for reasons not necessarily related to the policy conducted. It is also possible to have different views regarding exactly how good one thinks developments have been. But at a very minimum, it should be clear that it is difficult to find support in actual figures for an overly tight, “aggressive” monetary policy having sent the economy into a state of deflation, driven by poor development in the real economy. If one looks ahead, then? Could it not be the case that the Swedish economy has managed fairly well so far, but that things will go badly in the future, as a result of the policy conducted? Of course, one cannot make any guarantees with regard to the future, but one can in any case note that the National Institute of Economic Research, the Ministry of Finance and the Riksbank are all currently forecasting growth of around 2 per cent this year and around 3 per cent in 2015–2016.

“The Riksbank has aggressively, using a high repo rate, tried to prevent household debt from rising” The first part of the criticism can in turn be divided into different parts. For one thing, it claims that the Riksbank has leaned against the wind aggressively, and for another thing that household debt has been the main, if not the only, reason for this policy. I intend to comment on these points one by one. So how much has the Riksbank in practice leaned against the wind in recent years? My view here is clear. The monetary policy conducted after the crisis has for the most part been governed by traditional monetary policy motives, that is, the expected development of economic activity and inflation over the coming years. Giving consideration to the risks associated with the developments in household debt and housing prices has been part of our assessment, but a relatively minor part. The picture painted in the criticism has been quite different. Here the starting point is instead that the Riksbank’s concern over developments in household debt was the main motive for raising the repo rate after the financial crisis. Much of the criticism even seems to assume that household debt was the only motive for raising the repo rate.
Those forces are often important in emerging markets: their terms of trade move around more and they are also subject to more volatile financial flows than developed countries. Shocks that would tend to depress the nominal exchange rate, were it free to fall – a drop in the terms of trade, for example, or heightened risk aversion and capital flight – instead show up as negative inflation 18. It’s not just the volatility that’s higher, however: it turns out that shocks to inflation are also more persistent in countries with fixed exchange rates (Chart 13; see also Monacelli and Gali (2005)). And while this may simply reflect the particular disturbances affecting the equilibrium real exchange rate – perhaps they play out only over time – it’s also possible that the persistence of inflation owes something to the lack of a stable domestic objective for monetary policy. In our theories, wage and price-setting are forward looking: high (low) expectations of inflation over the future drag up (depress) actual inflation today. That’s precisely why central banks concern themselves with the stability of inflation expectations. It’s also why a credible inflation target is to some degree self-regulating. If people expect inflation generally to be on target, over the medium term, the central bank has to do less actively to ensure it. Notably, the persistence of movements in UK inflation fell sharply after the introduction of inflation targeting in 1992 (Chart 14).

Even though the direct effect of that decline will drop out of the annual comparison later this year and in early 2016, there’s a risk that, by depressing wage growth, sub-target inflation could persist for longer than we expect. BIS central bankers’ speeches  11  Chart 15 Real interest rates are low  More fundamentally, as I sought to explain in a recent speech, the “neutral” interest rate consistent with stable growth and inflation seems to have fallen significantly over the years, both before and since the financial crisis. That’s why, even without deflationary expectations, central banks came up against the zero lower bound for interest rates. And it’s that zero bound that ultimately makes deflations costly. Source: BOE, Barclays Capital and own calculations. My own view, however, is that the likelihood of a broad and protracted deflation, afflicting wages as well as prices, is pretty low. The evidence suggests that asset purchases positively affect nominal growth – they may not by-pass the lower bound on interest rates but they certainly soften it. My guess is that, with the financial system improving, and signs that the worst fears about the global economy may be subsiding, the neutral real interest rate is more likely to rise than fall over the next couple of years. Over that period, headline inflation will get a sizeable kick upwards, once the falls in food and energy prices drop out of the annual comparison.
Cogley, T. and Sargent, T. (2005), ”Drifts and volatilities: monetary policy and outcomes in the post-WWII US”, Review of Economic Dynamics, vol. 8, pages 262-302. Curdia, V., and Woodford, M. (2009), “Credit frictions and optimal monetary policy”, mimeo. Dooley, M.P., Folkerts-Landau and Garber, P. (2004), “The revived Bretton Woods system”, International Journal of Finance and Economics, vol. 9, pp. 307-313. Dowd, K., Cotter, J., Humphrey, C. and Woods, M. (2008), “How unlucky is 25-sigma?”, Nottingham University Business School CRIS working paper 2008.III, March. Freeman, R.B. (2008), “Labor market imbalances: Shortages, surpluses or what?”, in J. Sneddon Little, ed., Global Imbalances and the World Economy, pp. 159-182. Federal Reserve Bank of Boston: Boston. 18  BIS Review 101/2009  Furceri, D., and Mourougane, A. (2009), “The effects of financial crises on potential output: New empirical evidence from OECD countries”, OECD Working Paper 699, May. Gerali, A., Neri, S., Sessa, L., and Signoretti, F. M. (2008), “Credit and banking in a DSGE model”, mimeo. Gertler, M., and Karadi, P. (2009), “A model of unconventional monetary policy”, mimeo, NYU, April. Goodfriend, M., and McCallum B.T. (2007), “Banking and interest rates in monetary policy analysis: a quantitative exploration”, Journal of Monetary Economics 54(5), pp. 1480-1507. Goodhart, C. A. E., P. Sunirand, and D. Tsomocos (2005), “A risk assessment model for banks”, Annals of Finance 1(2), pp.197-224. Goodhart, C. A. E., P. Sunirand, and D. Tsomocos (2006), “A model to analyse financial fragility”, Economic Theory 27 (1), pp.107-42.

Ordinary US mortgage loans are usually non-recourse and offer the borrower the option of both early repayment and of default if the price of the house falls below the value of the loan, leaving the lender to recover what they can from re-sale of the house at what will be an uncertain price. US sub-prime mortgages also embed an option for the lender. Essentially sub-prime mortgages are structured as a rolling sequence of short-term loans, with the lender sharing in some of the increase in housing equity when house prices rise and having discretion over whether to offer a new and affordable loan depending on whether house prices have risen or not (see Gorton, 2008, for further details). As a consequence of these embedded options, RMBS, particularly of sub-prime mortgages, have a rather complex payoff structure that is tricky to price and difficult to monitor. CDOs are yet more complex. These re-package the payoffs in bundles of asset-backed securities into an ordered hierarchy of other securities, with each tranche only bearing losses once tranches above it have been wiped out. A bundle of risky assets could thus be repackaged into other assets, some of which offered bond-like returns suitable for investors such as pension funds seeking low-risk assets, while the tranches bearing more risk would be sold to those willing to carry more risk 6 . But the pay-offs to these assets are highly nonlinear in the underlying risks (see Fig. 11).
2  BIS central bankers’ speeches  Subsequently, on 6 September 2011, we decided to introduce the minimum exchange rate as an exceptional and temporary measure. Through the minimum exchange rate, the massive overvaluation of the Swiss franc was partially corrected. In this way, the SNB countered the acute threat to the Swiss economy and the risk of a deflationary development. The minimum exchange rate served the Swiss economy well. It helped to see it through the turmoil of that period and bought some time so that the economy could adjust to the new conditions, at least to some extent. Production and employment recovered faster than in many other countries. Over the past two years, GDP has grown by approximately 2% on average. The Swiss economy is now better placed than it was in 2011. New parameters for the economy: assessment and outlook What is our current assessment of the economic outlook, given the changed situation? Before discontinuing the minimum exchange rate, the SNB was expecting growth of some 2% for this year as well. We now anticipate GDP growth of just under 1%. With the end of the minimum exchange rate, Switzerland faces more difficult times ahead. Overall, the Swiss franc is once again significantly overvalued. The sharp, and above all abrupt, appreciation of the Swiss franc represents a major challenge. Our economy has time and again demonstrated how adaptable and innovative it is, and it can certainly handle a gradual, longterm appreciation in the real exchange rate.

As soon as the global economy has recovered sufficiently, interest rates will rise again. With all the concern about negative interest it is important to remember that when inflation is negative, real interest rates are higher than nominal interest rates. This is the case in Switzerland at the moment. If inflation is lower than the nominal interest rate, the end result is still an increase in purchasing power, even if an investment is not earning a nominal return. In the past, the rate of inflation has often been higher than the nominal rate of interest. In other words, in terms of real returns, there have certainly been times when saving was even less worthwhile than it is now; times, in fact, when savings lost value in real terms. Concluding remarks Ladies and gentlemen, I come to my concluding remarks. As you will have gathered from my comments today, the international environment remains extremely challenging for the Swiss economy and the SNB’s monetary policy. Interest rates worldwide have been very low for a long time. The after-effects of the financial crisis persist and are hampering global economic developments. At the same time, the Swiss franc is significantly overvalued and presents major difficulties for our economy. Nevertheless, I will venture to make two forecasts. First, that our economy will overcome these challenges successfully. Second, that negative interest will not become the “new  BIS central bankers’ speeches  5  normal”.
Just focusing on the international aspects, let me mention two points: first, only a handful of the thousands of banking institutions in the EU can be considered as truly panEuropean, even though these institutions make up a significant part of the banking market. In the same vein, a significant proportion of banks in a number of the new EU member states are foreignowned. Clearly, pan-European institutions are key to the EU’s position in the global system, and we must do everything we can to ensure they can play their role. But we also need to be careful that any measures we take in the interests of promoting greater efficiency for international institutions do not impose undue expense on smaller institutions, and we must take a perspective that is acceptable for both home and host supervisors. My third point is linked to this, and concerns the need to observe the principle of subsidiarity, a key tenet of the EU which says that action should only be taken at EU level where national or local action cannot have the desired effect. This principle is particularly relevant given the continued diversity of the EU banking industry and consumers. Supervision is best conducted close to the markets and institutions. Last but not least, I believe we need an approach which is realistic in the short to medium term.

There is no need for me to explain the dichotomy that arises when we have, on one hand, an industry that is becoming increasingly internationalised in nature and, on the other, a supervisory framework that remains predominantly based on national responsibilities and accountabilities. In a context where banking groups increasingly take decisions and manage risks on a global basis, inconsistencies or differences in the regulation and supervision across the countries in which they are active may create compliance costs and inefficiencies. Furthermore, adverse developments in one bank are more likely to have financial stability implications for several countries. These issues are certainly not exclusive to the EU. But the existence of the EU project adds an extra dimension, which brings challenges, responsibilities and also opportunities. Progress has been made in building the single market in financial services, but we are not there yet. In some segments of the financial markets, such as retail banking, there is a long way to go to achieve a fully integrated market. And recent experiences in relation to some cross-border acquisitions seem hardly compatible with the spirit of the single market. We face, therefore, several challenges: to safeguard the efficiency, effectiveness and consistency of supervisory action in more global and integrated financial markets; and to reduce the remaining obstacles to cross-border finance, both in terms of cross-border consolidation and in the provision of products and services. Some of these national differences have developed over a long period of time and go beyond the prudential or supervisory sphere.
From end-2007 to mid-2009, US GDP fell off by more than 4 pp; in the case of the euro area, the loss between the first quarter of 2008 and the second quarter of 2009 was close to 6 pp. After the double-dip recession, which ran until the first quarter of 2013, a slow recovery ensued, with modest but sustained rates of increase in output. Only in the second half of 2015, seven years after the first recession began, did the euro area regain overall the pre-crisis levels of income and consumption, levels which even today have still to be restored in the case of gross capital formation. As to the euro area unemployment rate, while it has moved on a declining trend since the current recovery phase began, it remains at close to 10%, almost 2.5 pp above the level prevailing in early 2008, and double the rate in the US economy. In Spain, which had built up most significant imbalances, the depth and seriousness of the crisis was unprecedented. From 2007 to 2013, GDP fell by close to 8 pp and, foreseeably, it will only be this year, in 2017, that income will reach its pre-crisis levels. As in other episodes of our economic history, the most severe costs were felt in the labour market. In the 2007-2013 period, employment declined by over 18%, taking the unemployment rate, four years back, to 26% of the labour force.

23.01.2017  Presentation of the book “La Historia de Foment del Treball 1771-2011” Foment del Treball Nacional, Barcelona Luis M. Linde Governor  Mr. President of Fomento del Trabajo Nacional, distinguished authorities, ladies and gentlemen: Let me begin by thanking Fomento del Trabajo Nacional and its president, Joaquín Gay de Montellá, for their invitation to take part in this event which has seen the presentation of the two books that compile the history, over more than two centuries, of this great institution. Thank you to Jordi Gual for his opening address. And my congratulations to the authors, Manuel Millán and Francesc Cabana, and to all the managers and associates of Fomento del Trabajo. Foment del Treball Nacional, the oldest employers’ association in Europe, remains fully active today, with a significant presence in our economic and business life. As the epilogue to the study presented today states, it is a story without an ending, and we are all happy that this should be so. The role of this private, independent and not-for-profit institution has always been to defend the interests of its associates and of all Catalonian entrepreneurs. Fomento has been a liaison with the authorities, but also with the representatives of civil society. Its objective, the compass steering its initiatives and taking of positions, has been to maintain an environment conducive to the pursuit of productive activities and the sound functioning of companies. And this has been its major contribution to the economic development of Catalonia and of Spain.
The Riksbank has therefore taken powerful measures in recent weeks, the aim of which has been to enable normal companies to finance their activities. It is clear that companies are having problems doing this at the moment. Companies that obtain funding by issuing corporate bonds or commercial paper have been affected by the turbulence on financial markets and the periodically limited bond trading. From our conversations with business leaders throughout Sweden, it is also clear that the shortage of liquid funds is a major problem and several have also experienced a deterioration in their funding terms. The most vulnerable sectors are finding it most difficult to obtain loans from banks. In other words, there is a major need for loans to both small and large companies so that they can survive a period in which the economy risks freezing over. Although we will not be able to prevent this, it is a question of reducing the risk of viable companies being forced to close and lay off staff due to a lack of money. This could exacerbate the downturn in the economy and depress output and employment in the long term. 2 [5]  Seven measures in the space of two weeks As a first measure, the Riksbank has therefore launched a programme of corporate lending via our monetary policy counterparties. The aim is to support credit supply to Swedish companies.

The GIC is a Philadelphia-based nonprofit think tank with the mission to "encourage the expansion of global dialogue and free trade in order to improve cooperation and understanding among nation states, with the goal of reducing international conflicts and improving worldwide living standards." This is indeed a noble goal in today's changing world full of new challenges and, unfortunately too often also conflict. Eesti Pank is honored to have been included in the GIC list of cooperating institutions for a number of years already. Our people have participated in GIC events both as speakers and members of the GIC delegation. We have first-hand experience in how dedicated the GIC is in fostering the cause of free markets, cooperation and liberty. BIS Review 104/2008  1  Ladies and gentlemen, thank you once again for coming here today. I am now most pleased to invite David to say a few words of welcome on the behalf of the GIC. 2  BIS Review 104/2008