samchain/econo-pairs-v1 huggingface dataset:
I would define private sector involvement (PSI), for the purpose of this discussion, as intentional efforts and contributions, formal or informal, undertaken in a context of sovereign financial distress. This support ranges from softer forms, such as preventive talks, to harder forms, such as debt rescheduling, restructurings, reprofiling or even debt write-downs.1 2 In the remainder of my talk, I will look mainly at the harder forms of PSI, often called debt restructurings. 1 2  See Enderlein, Müller, and Trebesch, 2006. Soft forms of private sector involvement include those that would not change the terms and conditions of the bonds or loans. Such forms may include voluntary roll-over agreements and preventive talks and meetings. By contrast, harder forms of private sector involvements imply changes to the terms and conditions of the bonds or loans. Under some forms, the private sector participants may face a net present value loss, in other cases they would not face such a loss. BIS central bankers’ speeches  1  The basic rationale behind involving private creditors when a debtor is in distress is straightforward and uncontroversial: creditors and investors should bear the consequences of their decisions as fully as possible and should not rely on taxpayers’ money to be bailed out.3 The underlying reason has long existed: a bailout by taxpayers today may encourage risky lending by private investors in the future. In the corporate sector, it is actually commonplace to apply such principles.

As always, what I have to say today reflects my own views and not necessarily those of the FOMC or the Federal Reserve System. 1 The economic outlook Turning first to the economic outlook, the real GDP growth rate appears to have slowed sharply during the first half of 2015. Based on the revision we received last week, firstquarter real GDP fell by 0.7 percent at an annualized rate. Although most projections anticipate a pickup in growth to around 2 percent or slightly higher in the current quarter, there is little question that economic growth has slowed significantly from last year’s secondhalf pace. What’s going on? Why has growth slowed and what does this portend for the remainder of the year? As I see it, the contraction in GDP growth in the first quarter represents a mix of factors. These include another unseasonably cold and snowy winter, a sharp contraction in oil and gas investment, a deterioration in the trade balance due – in large part – to the stronger dollar and sluggish foreign demand, and a slowdown in consumer spending growth after a very strong fourth quarter. After adjusting for weather effects, I think seasonal adjustment issues probably also played some role. For example, real defense spending has declined eight times in the past nine years in the first quarter, suggesting there is a seasonal adjustment issue. But I judge that this has had only a modest effect on measured real GDP growth.
This has contributed to fuel a longstanding experience in addressing safety and efficiency issues and trade-offs from a public policy perspective that I would like to refer to, in order to draw a few lessons that you might be willing to consider in the course of the debates you will have today. Over the past decade, the financial sector has changed considerably with the emergence of the Internet and the use of new information technologies. This is particularly true for payment means. The introduction of chip and PIN in France in the early nineties, and then all across Europe in the past few years is a great example of how innovation can bring about efficiency but also safety benefits to the payments chain. Such introduction has indeed contributed in making card payments highly secure at the point of sale. However, innovations have also brought about new challenges in terms of risks to address. This is notably the case with the development of distant payments allowed by the Internet. As underlined in the report on card fraud published by the ECB in February 2014, fraud on “card not present” transactions, mainly via the internet, increased by nearly 21% in 2012 in the SEPA area, and accounted for 60% of all fraud losses on cards issued inside the SEPA. Fortunately, the vulnerabilities at the root of those frauds are well identified and important efforts are underway both by public authorities and the private sector to address them.

As the proposal for the revised Payment Services Directive is currently discussed in the Council of the European Union, a unique opportunity is given today to all stakeholders to tackle the different issues raised by the new regulation in the presence of representatives from all European competent authorities that are involved. Once again, thank you all for being here, and I wish you fruitful and vivid discussions on all of these aspects, hoping this conference will provide you with a comprehensive overview of the new security challenges for retail payments. Before leaving the floor to our first set of panelists I now invite you to listen to Benoît Cœuré, Member of the Executive Board of the European Central Bank, who cannot be physically with us today but who has recorded his comments for us. Thank you for your attention. 2  BIS central bankers’ speeches
The benefits of the euro for individuals and businesses, its contribution to a more effective participation of Maltese enterprises in the Single Market and the possibility of using the euro as a means of competing on international markets were also important considerations. But while there were many compelling reasons for an early adoption of the euro, there was also an understanding of the need to avoid the economic costs of a premature entry. Consequently, there was some hesitation in adopting an ambitious reform programme. These concerns were well-founded. At the time Malta was preparing to join the EU, the economy was emerging from a period of stagnation, a widening output gap and a slow pace of productivity growth. In addition, while the Government planned to reduce the budget deficit from almost 10% of GDP in 2003 to below 3% by 2006, an adjustment of that magnitude clearly presented considerable political risks, not least because some fiscal tightening was already underway. The unemployment rate, meanwhile, was edging upwards in response to the ongoing restructuring process and the further liberalisation of markets as a result of EU accession, making any further retrenchment painful for most households. 1  For a fuller treatment of Malta’s case for adopting the euro, see Malta’s Strategy for Participating in Economic and Monetary Union and Adopting the Euro, Government of Malta, Central Bank of Malta, April 2005. BIS Review 77/2007  1  At the same time, many indicators suggested that Malta was well suited to participate in the EU single currency area.

…  6  BIS central bankers’ speeches  I therefore consider it important that monetary policy is conducted in a clear and comprehensible manner so that it can be evaluated easily and fairly. At present, the Riksbank makes a qualitative assessment of resource utilisation based on a number of different measures. This contributes to making the justification for the monetary policy decisions unclear and it also makes it more difficult to assess the Riksbank and hold it accountable. I thus instead want to focus on stabilising unemployment around a long-run sustainable rate and not on trying to stabilise a number of other, quite shaky measures of resource utilisation in the economy, such as the output gap. Compared with other measures of resource utilisation, unemployment has a stronger link to household welfare, is better understood and more familiar to the public, is measured often and with fewer errors and is seldom revised. The fact that other measures of resource utilisation are not appropriate as targets for monetary policy of course does not prevent them from playing an important role as indicators when assessing inflationary pressures and constructing inflation forecasts. Nor do I see that there is any support for a qualitative assessment of resource utilisation instead of a quantitative, measurable target fulfilment. In economic policy it is now wellknown that targets must be measured quantitatively to obtain sufficient weight and to be fulfilled in practice. “What is measured gets done,” as they say.
8  BIS central bankers’ speeches  Figure 6 GDP growth (percent) 8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  -6  08  09 Annual change  10  11 (1)  -6  Quarter-on-quarter change (2)  (1) Dark blue shows growth range for GDP forecast for 2011 in Monetary Policy Report of March 2011. (2) Seasonally-adjusted series. Source: Central Bank of Chile. Table 2 Economic growth  (annual change, percent)  2009 GDP Domestic demand Domestic demand ((w/o inventory change) Gross fixed capital formation Total consumption Goods and services exports Goods and services imports Current account (% GDP)  -1.7 -5.9 -2.9 -15.9 1.9 -6.4 -14.6 1.6  2010 5.2 16.4 11.5 18.8 9.3 1.9 29.5 1.9  2011 (f) 5.5-6.5 7.6 8.7 13.9 7.0 6.8 9.6 1.2  (f) Forecast. Source: Central Bank of Chile. BIS central bankers’ speeches  9  Figure 7 MPR and expectations (percent) 9  9  8  8  7  7  6  6  5  5  4  4  3  3  2  2  1  1  0  0  07  08  09  10  EES Mar.11  11  FOS 2Q Mar.11  12  13  MPR  Source: Central Bank of Chile.

The diversified portfolio has posted considerably lower falls in value in crises, and the gain increases with the duration of the crisis. Chart 7: Increasing gains from diversification over time In addition, broad diversification reduces the portfolio’s vulnerability to extreme events, which can be illustrated by examples from the history of global financial markets since 1900. We have data for equity market returns in 23 countries for this period. Two of these markets were closed down last century and the assets expropriated, ie Russia in 1917 and China in 1949. The markets did not reopen until the beginning of the 1990s. While the Chinese market was small in 1900, the Russian market accounted for six percent of a market-weighted global index.6 Chart 8: Fifty years of negative real returns in individual countries Although developments have been less dramatic in other countries, equity markets in France, Germany and Japan have all experienced periods of negative real returns of more than 50 years. The longest period of negative real returns for the global index has been just over 20 years.7 Diversification therefore provides some protection even against the most extreme outcomes, even though it will never be possible to completely shield the return on the GPFG from such extreme events. The risk associated with being a shareholder in 9000 companies Chart 9: “Diversification is the only free lunch in finance” Harry Markowitz, the founder of modern portfolio theory, is reported to have said: “Diversification is the only free lunch in finance”.
Consumers of financial services need to have confidence: in the security of transactions, in the protection of their assets and in their freedom of choice. The players in the sector also need to have confidence: in each other, because they remain interdependent, and in the rules of the game, i.e. in the regulatory conditions under which they can carry out their activity. As financial stability authorities, central banks and supervisors have a role to play in maintaining this confidence, in all the forms I have just mentioned. In this respect, I would like to share with you three convictions: Firstly, the traditional pillars to ensure confidence including trusted third parties, central banks and supervisors, cannot be replaced by "algorithmic" confidence, i.e. by rules of the game that would be coded once and for all and for which respect would be entrusted to algorithms, even if they are encapsulated in "smart contracts"... Will the forces pushing towards tokenised and decentralised finance make unbalanced relationships disappear? As well as failing governance mechanisms, the concentration of operational risks, and cyber attacks? In my opinion, the answer is no: trusted third parties, central banks and supervisors are still needed and in my view not about to disappear...  2/3  BIS - Central bankers' speeches  Secondly, and this is a corollary to my first point, confidence requires maintaining central bank money as the anchor of the financial system. Finally, confidence requires a regulatory framework that is clear, fair ("same business, same risk, same rule") and balanced, i.e.

In the UK, I don’t think we saw a major prudential failure of capital and liquidity which did not have a governance and management story at is root, and we had a system which was very poor at creating the right incentives for good outcomes. Here I want to put the emphasis on creating the right incentives. In my experience supervision is in part about creating and overseeing those incentives. The critical distinction here is that supervision is not just about doing things to firms, it is also about creating the conditions for firms to do this right thing in the first place. Let me give three examples of what we are doing. 2  BIS central bankers’ speeches  First, we have been much more active in remuneration policy and practice. I have no interest in regulating the level of pay, but we are interested to ensure that remuneration is compatible with meeting capital requirements (so it can be varied to do so) and that variable remuneration is deferred and can be withdrawn, and is thus compatible with creating the right incentives by putting that remuneration at risk if the firm fails to conform with the objectives of safety, soundness and good conduct of business. I am not in favour of limiting variable pay in the way European legislation has done through the so-called bonus cap because it reduces the opportunity to create the right incentives. We then supervise firms to ensure those incentives remain in place.
The time purchased by stimulus has been well spent fixing the fault lines which caused the global financial crisis. Derivative markets have been made simpler and safer. Fragile shadow  1  The IMF has downgraded their growth forecast for the fifth consecutive year; and now expects global growth to be around 3 ½% in 2016 and 2017. In part, this reflects a reduction in the IMF’s assessment of global potential growth to below the around 4% average growth rate in the decade prior to the crisis. At the Bank of England, our protections are slightly weaker still. We expect PPP-weighted global growth this year to be just 3.0%, a quarter of a point lower than our estimate for 2015. BIS central bankers’ speeches  1  banking activities are being transformed into stronger market-based finance. And the scourge of too-big-to-fail is ending. 2 Most notably, a more resilient global banking system is being built. The dog that hasn’t barked in recent months has been financial distress at the core. This means banks are poised to dampen rather than amplify the impact on households and businesses of recent global financial shocks. Monetary stimulus has also made room for the repair – if not yet the completion – of European Monetary Union. Over the past year, euro-area growth has broadened, though in the ECB’s judgment, it has not yet strengthened to a degree consistent with its price stability objective let alone the expectations of Europe’s citizens.

4, part 2 (November 2000): 1007–35; Miles Kimball, “How and Why to Eliminate the Zero Lower Bound: A Reader’s Guide,” Confessions of a Supply-Side Liberal blog, September 20, 2013. BIS central bankers’ speeches  privacy. If these aren’t enough however, let me suggest another, very important benefit of currency that I explored in a paper with Charles Kahn and William Roberds. 3 The anonymity afforded by currency transactions prevents a buyer from suffering from any actions taken after the transactions that could exploit the knowledge gained by the seller of the buyer’s identity. For example, identity theft, or theft of credit or debit card information, is avoided through the use of currency. This is an economic benefit that is distinct from valuing privacy from a civil liberties point of view. If currency cannot be used in transactions, buyers are at a disadvantage, and many otherwise beneficial transactions (not related to buyers seeking to engage in tax evasion or otherwise illicit activity) would not take place. It is important to consider whether the move to eliminate currency, or to alter radically how currency works, represents a degradation or an improvement in technology. Should society voluntarily abandon a widely used technology that has enormous benefits and features that are currently irreplaceable, such as the privacy that comes with an untraceable transaction? While some of those features are used by criminals to facilitate socially destructive activities, the vast majority of currency uses are legal and productive.
In Malaysia, solutions tested in the Bank’s regulatory sandbox enabled the Bank to design regulatory safeguards that would allow the implementation of end-to-end electronic know-yourcustomer processes for the provision of remittance services. By dispensing with the need to conduct physical face-to-face verifications, this is expected to significantly expand access to remittance services for customers working and living in remote parts of Malaysia, while effectively addressing money laundering and terrorist financing risks. Bank Negara Malaysia also successfully collaborated with the World Bank and the money services business industry in Malaysia to pilot and adopt solutions that have expanded the reach and reduced the costs of formal remittances. Second, policy life cycles will need to be managed more proactively, to allow for policies to be renewed when conditions change. While much is often said about policy stability, policies that fail to keep pace with conditions that are changing far more rapidly than we have experienced before, can be counterproductive at best, and at worst, create greater risks for the system. The SDGs are undeniably one of the most comprehensive attempts to capture the most important global challenges that we face. Solutions to these challenges will invariably create new issues for policy makers to consider. This in turn will lead to shorter policy life cycles, and a need for faster policy responses to emerging issues. Third, we need better remittance data. It is encouraging that efforts are being taken to ensure the availability of official global data sources on remittance flows.

Remittances have significant potential to deliver such opportunities to millions of migrants in their home countries. Let this Forum serve as a call to action, based on an honest search for better understanding and a genuine commitment to pursue individual and collective solutions. With much at stake, we cannot afford not to. Thank you. 5/5  BIS central bankers' speeches
Page 11 of 19  How to define “future expenditure” More broadly, it is still difficult today to formally calculate productive or "future" expenditure, i.e. spending that would have the most favourable long-term effects on economic growth and output capacity or on the climate transition. A consensus appears to be emerging in economic research literature whereby spending on public investment has a more positive effect on growth than operating expenditure. For example, according to our internal models, mediumand short-term multipliers are higher for public investment than for public sector wages. But would this also be true in respect of expenditure on any roundabout or multimedia centre? There is fierce debate around what exactly investment or productive capital actually includes: “basic” infrastructure like roads, bridges and airports generally form the common denominator, to which building construction is sometimes added. “Social” infrastructure such as education or public health  Page 12 of 19 facilities constitute another potential category of productive expenditure: investment in education and skills boosts labour productivity and the economy's innovation capacity. More recently, “digital” infrastructure has sometimes been included in productive expenditure, albeit with less clearly defined boundaries, and before us the enormous challenge of artificial intelligence. This  list  of  questions  without  answers  may  appear  frustrating. But it is also, primarily, a call for more research, and Paris should be a centre of excellence here thanks to institutions that are pioneers in this area (France Stratégie, OECD in the international arena, etc.).

The outcome of these measures would appear to be useful without being decisive, and the illusion of NPM has gradually dissipated. In particular, measuring the performance and quality of certain public services sometimes runs into intrinsic measurement difficulties. v More than twenty years on from this research, twelve years after Philippe Aghion and Alexandra Roulet called for a "Rethinking of central government”, vi it is  Page 9 of 19 regrettable that macroeconomic analysis is still of so little assistance to public management. Research literature focuses almost exclusively on assessing the success of fiscal adjustment strategies, omitting the fundamental aspects of the quality and effectiveness of public spending. Certain questions have barely even been tackled. I would like to mention three, beginning with measurement of the output of public services. How to measure the output of public services? The inherent lack of a selling price for non-market public service output has never really been overcome, and national accounting uses a simplistic arrangement to get around this, consisting of measuring it as the sum of production costs vii - in other words, mainly public employee remuneration. This basically means that the only way to increase public service output today is to increase costs and the number of public employees. But how can we gauge the effectiveness and quality of public spending and public services without having any visibility over their 'real' output?