samchain/econo-pairs-v1 huggingface dataset:
Mr Bäckström: The current situation for monetary policy in Sweden  Speech by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, before the Standing Committee on Finance, Stockholm, on 23 March 2000. *  *  *  In my opening remarks to your Committee six months ago I noted that the Swedish economy was developing impressively. Growth was stronger than many had counted on and inflationary pressure was moderate. New jobs were being created and unemployment was falling. Since then the economy has definitely continued to impress. Forecasters have had occasion to revise their assessments of activity successively upwards. GDP growth in 1999 amounted to 3.8% and the number of new jobs totalled almost 90,000 - the highest figure in thirty years. This has been accompanied by surpluses on the current account and government finances. Moreover, the upward revisions refer mainly to growth and employment. Forecast inflation has not been adjusted upwards to the same extent, which is a testimony to the good circle at present in the Swedish economy. Inflation in the past three years Measured in terms of the consumer price index (CPI), inflation has in fact been exceptionally low for three years; the average annual level has been 0.5%. This level for the period as a whole is made up of CPI increases of 0.9% for 1997, 0.4% for 1998 and 0.3% for 1999.

2  BIS Review 144/2010  Finally, Ladies and Gentlemen, given the innovations around mobile banking and its attendant challenges, it is our expectation that this workshop will encourage dialogue between different market players in Zambia and within the region. This Conference provides an opportunity for such dialogue and I am glad that it takes cognizance of a dynamic market environment, paying special attention to innovation that may have significant macroeconomic benefits to all involved. We are therefore keen to draw on the policy debate arising from this Conference to move financial services in Zambia to new frontiers. As Bank of Zambia, we will play a catalytic role and facilitate private sector led developmental initiatives. I thank you. BIS Review 144/2010  3
In some areas of finance, however, it appears that quantitative models have increasingly been viewed as the alpha and omega of business reasoning. They have often served as a substitute for an independent evaluation by business managers and decisionmakers alike. We should therefore welcome some of the ideas put forward in the new “Financial Modelers’ Hippocratic Oath”, such as “I will remember that I didn’t make the world, and it doesn’t satisfy my equations” (Wilmott, 2009).2 Risk and luck Finance and banking are intimately linked with the notion of risk. Risk is a fascinating but difficult concept, if only because it is intimately linked with the concept of luck. In a risky world, heroes are more likely to be lucky than smart. In asset management, for instance, Barras, Scaillet and Wermers (2010) find that around 8% of mutual funds display a significant positive alpha, but of them only about 0.5% deliver a positive alpha that is not driven by luck. One question that arises from this finding is whether the associated statistics would be very different for the group of successful bank managers or successful traders in financial markets. Yet remuneration schemes do not appear to take this identification problem into account. It can be hypothesised that bonus payments are often a reward for luck rather than compensation for actual skill or effort. This hypothesis represents a very significant challenge for an efficient financial system. It is a challenge for a new school of finance.

It is the case, however, that mitigating the implicit subsidy to TBTF institutions does correspond to a socially desirable increase in the cost of doing business for these institutions. Is maximising return on equity an appropriate objective? As mentioned in our discussion of the cost of capital, return on equity will be affected. A more highly capitalised bank is expected to have a lower ROE because of its lower risk profile. However, this is socially desirable. The common emphasis on ROE should be handled with scepticism, as ROE is a measure that is not adjusted for the risk profile of the bank and thus can be easily manipulated by increasing leverage. Because ROE depends on the capital structure of a bank, this measure should not be used to compare two banks with different capital structures. If, however, two banks have the same capital structure, does it follow that targeting the highest ROE is the appropriate strategy? If a bank is operating efficiently, its return on equity will be positively correlated with the risk taken: on average, more risk means more reward and thus more profitability. However, as we have seen, there is such a thing as too much risk-taking from society’s perspective, in particular in the context of TBTF or systemically relevant institutions. That is, the amount of risk taken by a TBTF bank can diverge from the risk that society would like the bank to take.
The final point is how small the global market place has become and how events in one country can impinge on others. The chairman of the bank commented that they had not foreseen how the controversy surrounding Dr Robertson would cross the Atlantic to Scotland where he has no political constituency or business. This provoked the comment that the bank did not appreciate how new technology has shrunk the world. The moral of the story is that banks need to consider how their actions – anywhere in the world – will affect their customers or be perceived by them. But customers are not the only people the banks have to worry about. They also need to take account of regulators in the various jurisdictions in which they operate and the fact that regulatory standards may shift over time. The Credit Suisse Group has, for example, recently run into problems with the Japanese regulators because one of its subsidiaries in Japan was accused of engaging in window-dressing transactions with Japanese banks. These transactions are now deemed by the current regulators to be “inappropriate”, though they were apparently not so regarded in the past. This illustrates that banks may encounter what has been termed “regulatory risk” not simply when they break the law.

Taken to extremes, the  3  BIS Review 98/1999  system as a whole could be brought into disrepute. This is why we promoted the Code of Banking Practice issued jointly in 1997 by the two industry associations. The Code is intended to be observed by authorised institutions in dealing with their personal customers, and it provides an extremely useful mechanism for the promotion of fair and transparent banking services in Hong Kong. What tools can banks use to manage ethics in their own organisations? No doubt you will have been discussing this during the course of the seminar and I will not go into a lot of detail in this speech. Clearly, the first essential is for the bank itself to be clear about the key ethical values to which it subscribes. It then needs to ensure that the organisation and the employees act in accordance with these values. This can be done through the adoption of codes of conduct. The former Commissioner of Banking issued a guideline in 1986 which requires all authorised institutions in Hong Kong to prepare a code of conduct for their staff setting out the standards to which they are expected to adhere. It is also necessary to have policies and procedures designed to ensure compliance with the standards specified in the code of conduct. For example, many companies now employ “ethics officers” and give their staff specific training and advice on ethical issues.
You might recall that in setting out the economic case for membership of the European Union (EU) on this occasion last year, I emphasized that the candidate countries needed to seriously question the way they had managed their economies in the past and to resolve to improve their performance. I warned against underestimating the entity of the task because the necessary changes were pervasive, affecting both institutions and mindsets, policies and work practices, and they also entailed costs. It was this same realization of the difficult challenge implied by EU membership that lay behind the call I made, the day after the referendum result was confirmed at the April general elections, for an early mobilization of all the nation’s resources. It is, therefore, somewhat disappointing that there persists today an insufficient awareness of the profound economic implications of that decision and of the need for all to work hard to secure the benefits of membership. This is all the more surprising given the threat posed by the continuing weakness in our major export markets. The Major Challenges Facing the Maltese Economy It is against this background that I propose to focus attention on four major challenges which I believe must be tackled with urgency if the economy is to return to a higher path of sustainable growth and development.

Following in their footsteps, domestic conglomerates like Samsung and Daewoo started investing in film financing and video production. Korea’s experience above illustrates an important lesson for economic development. Properly structured development institutions can be a potent agent of change for private sector investment, drive growth, and forge inclusive societies. It can do a lot of good. But in reality, the real challenge is how to replicate the key factors that contribute to the success, and to achieve this more consistently across different political, economic and social contexts. With this in mind, let me outline the crucial factors that might help us understand this phenomena: a. First, a mindset shift to contribute more broadly to catalyse new growth areas; b. Second, the need to strengthen accountability frameworks; c. Third, the continuous cultivation of a strong culture of innovation; and d. Fourth, a robust corporate governance. Stepping up to the plate by further developing the non-lending roles More than ever, development financial institutions need to step up to promote new growth areas. They should perform a broader role to stimulate economic activity that would not otherwise take place. They could also improve the quality and scale of such activities. They can provide unique value propositions in terms of advisory and nurturing new growth sectors to become profitable and thus, attractive for private investors. I will highlight two successful examples. Firstly, in the Korean Wave example, they were the first to spearhead investments in the film and music industry.
There has always been separate currencies for Hong Kong and the Mainland, and “one country, two currencies” is further enshrined in the Basic Law governing Hong Kong for 50 years after the resumption of sovereignty14. The many differences between Hong Kong and the Mainland of China argue for monetary segregation and not monetary union. In 1994 when measures were taken in the Mainland to unify the official and market exchange rates for the RMB, involving a de facto devaluation of the RMB of 33% on an unweighted basis and 7% on a weighted basis.15 But this did not affect the Hong Kong dollar at all. So why should a devaluation in the exchange rate of the RMB, which in any case has been ruled out by the Chinese leaders, affect the stability of the Hong Kong dollar’s link to the US dollar now or in the foreseeable future? The Currency Board System 18. Technically, the Hong Kong dollar’s link to the US dollar is a very strong form of fixed exchange rate system which is called, in academic terms, a currency board system. It is quite different from the pegged exchange rate system that is more widely known and which requires active intervention in the foreign exchange market by the central bank to keep the exchange rate within pre-determined levels. By contrast, a currency board system does not require this type of foreign exchange market intervention.

Philipp Hildebrand: Principles for sound compensation practices Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Economic Outlook 2009 (Unternehmer NW-Schweiz), Basel, 23 April 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Most financial institutions viewed compensation systems as being largely unrelated to risk management and risk governance prior to the crisis. Short-term profits were rewarded with generous bonuses with little regard to the longer-term risks taken on behalf of the firm to generate those profits. With hindsight, it should therefore be no surprise that these bonuses fueled the excessive risk-taking that has ultimately undermined the global financial system. It is important for the future stability of our financial system that compensation systems be viewed as an integral part of the risk management system in financial firms, and designed and governed with this in mind. The Financial Stability Board (previously the Financial Stability Forum) has drafted a set of sound compensation principles for large financial institutions with exactly this goal in mind. The Principles were endorsed by the G20 leaders at the London summit earlier this month and aim to be widely implemented by the 2009 remuneration round. BIS Review 50/2009  1
Interest rates The main objective of the Central Bank of Iceland, like those in many other countries around the world, is to promote price stability. An intermediate objective has been to secure the value of the króna. To do so, the Bank applies its policy rates, namely the rates of interest that it sets for its transactions with credit institutions. In a scenario of overheating and inflationary risks, the Central Bank raises its interest rates, as it has been doing in recent times. The Bank already took such action in the second half of 1997 and raised interest rates fairly rapidly in 1999 and 2000. Over these two years, the Central Bank raised its interest rates seven times in all, by a total of 3.6 percentage points. The policy rate is now 11.4%, which is very high by international comparison. However, under certain circumstances interest rates have been this high or even higher in various other industrialised countries. Broadly speaking, these interest rate rises served a double purpose. Firstly, they were aimed at influencing the exchange rate differential with abroad, thereby exerting a direct impact on capital inflows and supporting the exchange rate of the króna. The other purpose was to contribute towards higher interest rates at credit institutions and thereby reduce the expansion in their lending. Experience shows that the impact on lending will emerge eventually. All these measures were aimed at reducing consumption and investment.

A weaker króna would have a multiple impact in the form of higher inflation, not least in the climate of overheating which has prevailed in Iceland recently, a resulting fall in living standards and difficulties for companies and credit institutions. Exchange rate policy reforms For quite some time now the Central Bank has been examining the option of abolishing the formal fluctuation bands for exchange rate policy and adopting instead direct inflation targeting as the basis of monetary policy. Articles on this topic have appeared in the Bank's publications in recent times and international agencies have recommended serious consideration of inflation targeting as the main monetary policy goal. The fixed exchange rate framework has gradually been eased and the fluctuation bands have been extended in phases, as I mentioned earlier. Indeed, the extension of the bands in autumn 1995 can be claimed to represent the first step towards instituting a new foreign exchange framework, with the next step taken in February last year. The Central Bank sees many factors in favour of adopting inflation targeting, which is a logical continuation of the flexible exchange rate policy that has been pursued. Monetary policy based on formal inflation targeting enjoys growing support and has been adopted by an increasing number of countries. Industrialised nations which have done so include Australia, the UK, Canada, New Zealand, Switzerland and Sweden.
Are the 16 million unemployed people in the European Union merely an equilibrium, on the one hand, and a statistic, on the other? But for most people the labour market is the market where – for better or worse, in sickness or in health – they sell their time and their skills at a market price. That price determines, in large part, their opportunities and economic welfare. Wage rates have a much greater significance in influencing the distribution of real incomes than do the prices of almost anything else. As a result, the labour market cannot be divorced from broader social and political considerations. If their terminology and language are sometimes insensitive, what do economists have to offer by way of ideas about unemployment? The prize for the most important idea and most insensitive terminology surely goes to Milton Friedman for the concept of the natural rate of unemployment. I shall discuss shortly the significance of this idea for monetary policy. But for a more elegant advocacy of a similar position it is necessary to delve further back in history. This month sees the 75th anniversary of the publication of what Milton Friedman described as John Maynard Keynes’ best book: A Tract on Monetary Reform. It is undoubtedly one of the most persuasive polemics ever written on the subject of monetary policy. To coincide with publication in December 1923, Keynes gave a lecture to the National Liberal Club in which he talked about “the triple evils of modern society”.

CPI and underlying inflation 1997 Annual average, per cent CP I  U N D 1X  U N D IN H X  4  3  1 .7 2  1 .4 0 .9  1  0 1997  UND1X = CPI excluding interest expenditure, taxes and subsidies UNDINHX = UND1X excluding goods that are mainly imported  3  BIS Review 61/1999  4. CPI and underlying inflation 1998 Annual average, per cent CPI  U N D 1X  U N D IN H X  4  3  1 .8 2  1 .0 0 .4  1  0 1 998  UND1X = CPI excluding interest expenditure, taxes and subsidies UNDINHX = UND1X excluding goods that are mainly imported  5. CPI and underlying inflation 4 3  UNDINHX 2  UND1X  1 0  CPI -1 1995  1996  Average impact on CPI  Annual rate for  1997  1996 •Interest rate fall -0,6p.p. •Tax changes -0,6p.p. 0,8 / 2,2 / 2,9  1998  1997 •Interest rate fall -0,9 p.p. •Tax changes +0,6 pe  0,9 / 1,4 / 1,7  CPI/ UND1X/ UNDINHX  BIS Review 61/1999  1999  4  1998 •Interest rate fall -0,6p.p. •Tax changes +0,2p.p. •Coffee, petrol -0,1 p.p.
More fundamentally, global growth has disappointed because the innovation and ambition of global monetary policy has not been matched by structural measures. In most advanced economies, difficult structural reforms have been deferred. In parallel, in a number of emerging market economies, the post-crisis period was marked by credit booms reinforced by foreign capital inflows, which are now brutally reversing (Charts 2 and 3). The international financial and monetary architecture has been tinkered with rather than transformed. With the forces of fragmentation now rising in many countries, it will be more challenging to build a truly open, global system. The consequences of such timidity are reflected in the sizeable downside risks which currently plague the global outlook. Chart 2 Credit booms across EMEs  2008 Q2  2014 Q1  Percentage points 80  2015 Q1  60 40 20 + - 0 20  Hong Kong  China  Singapore  Turkey  Brazil  Indonesia  Russia  Mexico  South Korea  Argentina  Poland  South Africa  India  Hungary  United States  United Kingdom  Spain  Ireland  40 60  Sources: BIS total credit statistics and Bank calculations. 2  2  With domestic and European legislation on resolution powers and on structural reforms in place and with a global approach to bail-in debt now agreed, the broad elements of the framework are settled. The principal challenge now is to implement. BIS central bankers’ speeches  Chart 3 EME capital flows reversing Per cent of GDP EM ex.

Despite a recent recovery, equity markets are still down materially since the start of the year. Volatility has spilled over into corporate bond markets with US high-yield spreads at levels last seen during the euro-area crisis. The default rate implied by the US high-yield CDX index is more than double its long-run average. And sterling and US dollar investment grade corporate bond spreads are more than 75bp higher over the past year. On the back of these concerns, risk premia have increased across the board, with “safe haven” assets and currencies benefitting at the expense of equities, credit and commodities. In this ‘risk off’ environment, correlations across asset classes are up sharply. Falls in market liquidity have contributed to strains in some markets. In treasuries and gilts, spreads between 30-year yields and the equivalent swaps have risen by over 40 basis points since the beginning of 2015. And there has been a widening in the spread between corporate bond yields and CDS premia which may reflect a reduction in arbitrage as dealers conserve their balance sheets. Banking stocks have been particularly hard hit, down about a quarter on average over the past three months, across the advanced economies, prompting some to question whether anything has really changed (Chart 5). This re-pricing likely reflects first and foremost renewed growth worries. Banks have always been high beta to the economy.