samchain/econo-pairs-v1 huggingface dataset:
Interest rate signals from the central banks were sometimes dwarfed by contradictory events in the markets. Conversely, financial stability is dependent on a smooth and predictable monetary policy. Hence, in the long run, the interests of monetary policy and financial stability coincide. However, in the short term we may need new tools, which are better focussed on the specific situation. To sum up: Central banks need to adapt their work processes, organisation and governance to achieve an optimal balance between monetary policy, financial stability and microprudential goals. There is not yet any internationally-agreed best practice on these issues but the debate is vivid. Everybody realises that these issues must be solved before there is another system-wide crisis. External evaluation also of financial stability work Before ending, I would like to mention the present external analysis of the Riksbank on the lessons from the financial crisis in relation to our monetary policy and financial stability work. This will reveal if we are – indeed – a useful central bank. BIS central bankers’ speeches  7  Each year, since the Riksbank was granted autonomous status in 1999, the Committee on Finance has carried out its own evaluation of monetary policy. In 2006, the Committee commissioned an external independent evaluation of Swedish monetary policy covering the period 2000–2005. In 2007, a year after the first external independent evaluation was published, the Committee on Finance decided to repeat this exercise every four years.

All of these issues are very much in line with my thoughts on what has to be done to create a truly useful central bank – to allude to the theme of this Symposium. I thank you for listening. 8  BIS central bankers’ speeches
It is admittedly true that as the economy has been in an upward phase since the summer of 1993, it is hardly surprising that productivity growth is above the trend; but a comparison with the corresponding upward phase in the 1980s leads to the same conclusion: the rate of increase in labour productivity appears to be approximately half of a percentage point higher than before. This accordingly means that the Swedish economy’s potential annual growth rate is between 2 and 2.5%. It may be asked, however, whether one can simply project productivity’s historical path. This is where the discussion of what is known as the New Economy comes in. Productivity growth in the United States has risen appreciably in recent years. The investment boom in the 1990s has been one factor here; corporate investment has almost doubled since 1990 and a very large share has gone into new information technology. This has led to what the economic jargon refers to as capital deepening, which amounts to a higher capital input per employee. A notable feature of the picture is thus that the new information technology seems to be having knock-on effects in the form of enhanced productivity in other segments of the US economy. Many observers therefore consider that the American economy is now capable of expanding at a rate of 3-3.5% without encountering shortages and an acceleration of inflation. A similar change could well occur in other countries that reap the new information technology’s potential benefits.

The infrastructure in a wide sense in the metropolitan areas, perhaps in the Stockholm area in particular, may affect the possibilities of continuing to benefit from the existing demand. The rapid price rise for houses and tenant-owned flats in the Stockholm area is a clear illustration of certain supply-side problems. Another sign is the shortage of rented dwellings, or rather the lack of mobility in this market. Thus it is not only labour demand that will determine the future development of unemployment. A growing part will be played by supply-side factors in the form of occupational and geographical mobility. So while it can be concluded that in the near future the Swedish economy’s growth rate may be capable of topping the potential level of - as I just indicated - between 2 and 2.5%, this applies only for as long as there is a supply of labour with the appropriate training and occupational experience and the possibility of being geographically available. According to the most recent national accounts, published just before Christmas, GDP growth in the first three quarters of 1999 was over 3.5%. The fourth quarter outcome is still difficult to estimate precisely but demand growth seems, if anything, to have accelerated. An unusually good Christmas season appears to have resulted in a strong trend for private consumption, for example. A continuation of the strong development is suggested, moreover, by such leading indicators as household confidence, a high increase in the money supply and rapidly rising asset prices.
This measure was also designed to safeguard monetary stability, which was jeopardised by the massive inflow of speculative funds. Maintaining the internal balance in a highly unstable international environment was the main focus of the monetary policy decisions in the years that followed. In Switzerland, price stability has been ensured since 1994, but it was only ten years later that it was also made a statutory goal of our policy. Central bank autonomy This constant pursuit of monetary stability would not have been possible if the National Bank had not been able to act independently – an essential advantage – since the day it was founded. The principle of central bank autonomy is widely recognised nowadays. Price stability can be better ensured if the institution responsible for conducting monetary policy has a clear mandate and can act independently of third-party instructions. This realisation has led to many central banks being granted independence during the last 20 years. In Switzerland, the debate on the status of the future National Bank took place at the end of the 19th century. In 1897, a project for the establishment of a state bank located in Berne and placed under the direct control of the Federal Department of Finance was adopted by parliament, but the proponents of an independent note-issuing bank to be domiciled in Zurich launched a referendum, and the law was rejected in a popular vote.

And we shall rigorously measure insurers’ performance. Failure to register favourable achievements will have its own consequences. Conclusion Change is not an option. It is a constant. While global insurance growth is expected to remain healthy and will continue to be driven by emerging economies over the next few years, the quality of growth is equally important. We want growth that is sustainable and balanced where benefits are enjoyed by society at large via higher levels of meaningful protection for households and businesses. We must be responsive to the changes that are taking place in our society and economy. We need to take urgent action or risk becoming irrelevant. The rising awareness of insurance in our population is a golden opportunity for us to make an impact and change the way insurance is perceived and experienced. The heightened consumer expectations and disruptive forces of the new economy will mean that accomplishing this will require a steadfast commitment to the 4/5  BIS central bankers' speeches  values that are fundamental to the social mission of insurance. We must always act in the public interest for the long term benefit of our society. 5/5  BIS central bankers' speeches
3 Under the RBC model in its more traditional versions, the economy is fully flexible and there is no role for macroeconomic policies, whereas under the NKM there are sticky prices that result in money not being neutral, which assigns a role to monetary policy. These provide the conceptual basis for the formulation of inflation-target regimes. It is important to place both types of models in their right dimension. The strategy of RBC models is to try to replicate economic fluctuations in the simplest, least distorted model possible. It originated in the attempt to use the neoclassical growth model to explain the business cycle as a result of productivity shocks, which is surely an interesting effort with theoretical consistency. These are very elegant models, but the difficulty of solving them analytically results in having to solve them using calibrations. As a result, there are often doubts regarding the values of the parameters, which in general are unobservable. To the extent that these models are free of distortions, there is no role for active monetary policies, since economic fluctuations are socially optimal. Certainly this is an attractive theoretical proposition, but it is absurd to think that this is how the world works. It will be difficult to explain the financial collapse with this type of model, because it has no frictions and provides very limited policy implications.

1 3/4  BIS central bankers' speeches  1 ECB (2018), “Special feature A: Financial development, financial structure and growth: evidence fromEurope”,  Financial integration in Europe. 2 ECB (2016), “Special Feature A: Financial integration and risk sharing in a monetary union”, Financial  integration in Europe. 3 ECB Financial Stability Review, (2019), forthcoming, May. 4 European Commission (2019), “Capital Markets Union: progress on building a Single Market for capital for a  strong Economic and Monetary Union”, European Commission contribution to the European Council. 5 ECB (2018), “Special feature B: Integrating euro area corporate bond markets: benefits and potential financial  stability challenges”, Financial integration in Europe. 6 The ECB’s price-based composite indicator of financial integration shows a pronounced increase during 2017,  while quantity-based integration has stalled since 2015 (see Indicators of financial integration in the euro area). 4/4  BIS central bankers' speeches
There are several reasons for this, for instance, stronger productivity  1  Chile and Israel also introduced an inflation target at an early stage, 1990 and 1991 respectively, but inflation and the targets were much higher there than in the other "pioneering” countries. 3/7  growth than expected and surprisingly low import prices. The reasons for the low inflation rate are to a large extent factors that are beyond the Riksbank’s control. Monetary policy decisions are based on a forecast of future developments and it is in the nature of things that unforeseen events can and do occur. However, with the benefit of hindsight, it is in my opinion clear that there would have been scope for the Riksbank to conduct more expansionary monetary policy than it did. However, we were by no means alone in making incorrect forecasts of inflation. In principle all of the other forecasters, albeit to different extents, made roughly the same forecasting errors. We all underestimated effects of the global slowdown in inflation and the low import prices and we incorrectly assessed productivity growth, which was much higher than expected. When assessing the situation and answering the question of whether excessively tight monetary policy has held back demand, it is important to remember that the forecasting errors are primarily due to supply-side factors and that monetary policy in recent years has nevertheless been expansionary, which is reflected not least in the increase in household borrowing and in rising asset prices, primarily with regard to housing, but also in equity.

The diagnosis is the same in the short-term derivatives market, whose integration, standardisation and depth have increased. This is reflected, for instance, in the scale of daily transactions and the huge expansion of the euro interest-rate swap market. These structural changes in the euro area money market have generated significant moves by market participants, who have concentrated within the euro area their euro cash management activity and have benefited from better liquidity on the secondary market. Of course, such integration has to be brought to fruition in the other segments of the money market, i.e. the repo market and the short-term securities market. Further integration will enhance the efficiency of the euro area financial markets and will be beneficial to borrowers and investors alike. –  With regard to the capital markets, progress towards integration has been significant, both on the euro-denominated bond market and the equity market. The gross issuance of long-term debt securities denominated in euro amounted to 791 billion euro in 1999, against the equivalent of 902 billion euro for debt securities denominated in US dollars. The pace of euro-denominated issues remained brisk in the first three quarters of 2000 at 498 billion euros. According to the Bank for International Settlements, euro-area private sector borrowers have issued about three quarters of their debt in euros since 1 January 1999, compared with an average of 50% in the predecessor currencies since during the 1990s.
As an example, it can be mentioned that prices for technology-intensive goods rose much more slowly than prices for services, even when inflation was high in Sweden during the 1980s. And inflation is currently much higher in many countries around the world, although they face the same development in international prices for technology-intensive goods as Sweden. In connection with this discussion, I would like to make it clear that an inflation target of two per cent does not mean that prices in each of the sub-groups behind the CPI will increase by an average of two per cent. As goods prices are expected to increase more slowly than services prices, service prices must probably increase faster than two per cent on average if the inflation target is to be attained.28 Figure A2 shows that this has not been the case. Closing comments Today I have tried to explain why I am worried about inflation having been below the inflation target for the past three years. This is mainly because a low rate of inflation can have a negative effect on wage formation and thereby the functioning of the labour market, and that the credibility of monetary policy can be damaged, which can mean that future monetary policy is less efficient and that economic planning is made more difficult by unnecessary uncertainty over future prices.

Second, I would like to discuss the economic challenges we face and what it takes to address them. I am acutely aware that the focus of policymakers lies elsewhere for the moment. But let me be quite clear: economic success is also part of the solution in other fields. Therefore, mitigating economic risks deserves to be high on the political agenda. The ECB’s monetary policy: working and still flexible It was about three years ago that inflation started moving away from the ECB’s medium-term inflation aim of below, but close to, 2%. Since October 2013, inflation has been below 1%. Throughout 2015 headline HICP inflation in the euro area was very low or even negative, remaining under the influence of low commodity prices, and euro area annual HICP inflation was estimated at 0.4% in January this year. In parallel to this trend, we had to continually revise our outlook for inflation: while at the start of 2015, our staff was forecasting inflation to reach 1.5% in 2016 and 1.8% in 2017, in December they projected a rate of only 1% for this year and 1.6% for 2017. Against this backdrop, the ECB decided in December to act again. Our assessment of the monetary policy stance had two parts. First, we noted that the measures put in place since the summer of 2014 had been very effective. The monetary stimulus that they introduced led to a broad-based easing of financing conditions, stimulated credit provision, and has since provided substantial support to the euro area recovery.
In addition, to inject greater impetus for market participants to shift from SOR to SORA, MAS, together with the SC-STS, will outline guidance by October this year, on specific deadlines to cease the usage of SOR in new financial products. It is important to provide forward guidance on this matter, so that banks and endcustomers can move in a concerted way towards achieving a smooth transition. This ensures our financial system is well-prepared ahead of end-2021. The forward guidance also matters from a risk management point of view. With the end-2021 deadline approaching, it is not prudent for banks and end-customers to enter into new SOR contracts that mature beyond end-2021. Doing so only compounds the problem that banks and customers will eventually have to deal with. 19 Third, is the need to build a bridge of clear and effective communication between  banks and end-customers. MAS expects banks to engage customers in a clear, timely and transparent manner. This includes raising customer awareness and providing clear explanations on: the global move towards using overnight near risk-free rates, the shift to SORA in the SGD interest rate market, how this benchmark transition will impact them, and how customer spreads over the loan reference rate may have to be adjusted to account for the economic differences between SOR and SORA, given that SORA is an overnight rate that lacks a term and credit risk premium. 20 When engaging customers on benchmark transition, banks should take into account MAS’ Fair Dealing Guidelines.

Execution needs to be well-sequenced and tightly coordinated. I would like to share three key pillars that can support a smooth transition: Preparing early at the individual firm-level Coordinating well at the industry-level Communicating clearly and effectively at the customer-level 16 First, at the individual firm-level, both banks and corporates must be ready to carry out this transition. This includes identifying risk exposures, putting in place appropriate contractual fallbacks, ensuring systems readiness, understanding the features of new SORA products, and ultimately, transacting in these products. Indeed, we have seen some early wins. MAS is encouraged by the success of our three local banks in completing SORA commercial loans9 with early adopters such as CapitaLand and Wilmar. We are also heartened that OCBC had launched a retail mortgage loan, while DBS had launched a business property loan, both referencing the compounded SORA rates published by MAS. Riding on these successful  pilots, we hope to see more banks start originating new SORA loans across the broader industry. Against this, MAS will be stepping up supervisory engagement to ensure banks are well prepared for the transition. MAS had conveyed its supervisory expectation of banks through a regulatory survey conducted earlier in the year, on the progress of banks’ preparations for the transition. This engagement will continue and will include elements such as systems readiness, legacy transition plans, and pace of adherence to industry guidance established by the SC-STS.
Under a single unified law, businesses will find it easier to comply with regulations; and at the same time the Bank of Thailand will strive to maintain flexibility in our supervision of payment systems in a way that mitigates risks but does not hinder innovation. In addition, the bill also provides assurance of payment finality and float protection, thus upgrading Thailand’s payment system to international standards. We acknowledge the importance of payment infrastructure in supporting the digital economy. The emergence of Financial Technology or FinTech along with its various innovations cannot be fully realized without having a good legal support and a clear policy. I will elaborate more on Thailand’s payment system in the third part of this talk. Before moving on to the next group of laws, I want to remind the audience that while I chose to highlight these three laws, there are many other legal reforms taking place that would enhance business productivity. One example is the Eastern Economic Corridor Bill, approved by the cabinet this October, which will establish a special economic zone across three provinces to attract investment in industries of the future. The zone is designed to facilitate business operations with extensive infrastructure investments to support transport, logistics, and public utilities. Firms operating within the special zone will receive additional incentives including tax-related and foreign labor employment benefits. Ladies and gentlemen, so far I have discussed laws that promote governance, economic opportunity, and productivity. The last group is sustainability.

At the same time, the introduction of the Inheritance Tax Act and the Land and Building Tax Bill will augment prudent spending by expanding the government’s ability in revenue collection. These laws will ensure a better tax structure to deal with future liabilities, promote greater fiscal balance as well as reduce wealth inequality. As for the Bank of Thailand, we play an important role in ensuring stability in the financial system. The experience of the Global Financial Crisis taught us an important lesson of a timely and efficient crisis management. In this regard, we have proposed an amendment to the Bank of Thailand Act to equip the Bank of Thailand with a broader set of resolution mechanism and enhanced safety nets in the financial system in time of systemic crisis. Ladies and gentlemen, my discussion today regarding recent and upcoming laws provides a snapshot of the legal framework to support our goal of sustainable growth. In the meantime, while one must accept that there will be many challenges ahead, particularly implementation issues, these new laws will at least set forth a necessary path for Thailand to move forward – a path I believe must be complemented by a firm policy direction. This leads to the last part of my talk, which I will focus on the Bank of Thailand’s policy direction and initiatives to support the country’s reform efforts. We are now at the onset of the third phase of the Financial Sector Master Plan (FSMP III), spanning over 2016 – 2020.