samchain/econo-pairs-v1 huggingface dataset:
Henry Ohlsson: The inflation target – a benchmark for price-setting and wage formation Speech by Mr Henry Ohlsson, Deputy Governor of the Sveriges Riksbank, at a conference, organised by Facken inom industrin, Bålsta, 16 April 2015. *  *  *  Accompanying charts can be found at the end of the speech. I would like to begin by thanking you for the invitation to take part in this conference. It’s a great pleasure to be here. Many faces are familiar after my 18 years on the Economic Council of Swedish Industry, while others are new. My own role is also new, the post of deputy governor of the Riksbank is an honour and carries great responsibility, but is also very interesting. It feels particularly appropriate to be holding my first speech in the role of Deputy Governor of the Riksbank in a context closely linked to wage formation. My subject today is why the inflation target is so important for smoothly-functioning price-setting and wage formation. The Swedish labour market is about to enter into large-scale wage bargaining rounds. Several hundred collective wage agreements will expire in the first part of 2016. As always, the outcome of future wage bargaining rounds is important for the parties directly concerned. This essentially concerns both companies’ competitiveness and employees’ purchasing power. Thus, the significance of the agreements extends across the entire economy. In the traditional Swedish model, different agents have clear roles. The social partners are responsible for wage formation through their negotiations.

At the same time, productivity in Sweden has not increased as quickly as in other countries. The development of unit labour costs reflects the difference between wage increases and growth in productivity. Unit labour costs, measured in the respective currencies, are shown in the column on the far right of the table. Sweden is here on the same level as Germany, but higher than the euro area as a whole and also higher than the OECD aggregate. Inflation towards the target – in an orderly manner Let me round off. One main purpose of my speech is to show how important the inflation target has been as a benchmark for price-setting and wage formation in Sweden. It is an important task for the Riksbank to create confidence in the inflation target. This is why we are worried over the current low inflation rate. The Riksbank wishes to safeguard the inflation target. We can do this by formulating monetary policy so that the current low inflation rate rises towards the target. During the spring we have therefore cut the policy rate further on two occasions and moreover decided to buy government bonds. We are prepared to do more than this if it proves necessary. At the same time, it is important that the journey back towards the inflation target is a smooth one and does not pose any threat to production and employment. We are now on the verge of very extensive wage bargaining rounds.
BIS central bankers’ speeches  1  Compare this with the fact that about 30% of Japanese trade is settled in yen, 50–60% of euro area trade is settled in euros, and 80–90% of US trade is settled in US dollars. Clearly there is the potential for more RMB transactions – especially trade and direct investment transactions where regulations have been liberalised – to be carried out internationally. And we can trust that China’s economic development and its global links will continue to be at the forefront in the coming years to support a full spate of offshore market activities. Currency convertibility and onshore financial market depth and liquidity The second set of characteristics involves currency convertibility and onshore financial market depth and liquidity. The Eurodollar market is an offshore market of a convertible currency and supported by extensive links with deep and liquid onshore financial markets. On the other hand, the offshore RMB market is a market of a currency that is not yet fully convertible, and the links with the onshore financial markets are still subject to limitations. The RMB is convertible in respect of the current account and certain capital account items such as direct investments, while other flows like portfolio investments can only be conducted under specified quotas. The opening up of even more channels for two-way flows between the onshore and offshore markets would be required to spur offshore RMB activities.

As the RMB becomes more widely used internationally, other markets that complement Hong Kong’s central role are emerging around the world. Cooperation between these different markets is conducive to growing the whole market, and we are seeing increasing linkages being set up to facilitate the flow of funds between the markets. BIS central bankers’ speeches  3  These increasing linkages are the result of several encouraging trends, including the fact that financial institutions in different financial centres have strengthened their business networks in order to serve customers’ RMB needs. For instance, the operating hours of Hong Kong’s RMB Real Time Gross Settlement system have been lengthened, providing the capability to serve the settlement of offshore transactions in the European timezone and early business hours in North America. We at the HKMA are also conducting a range of outreach activities to strengthen Hong Kong’s RMB business links with other parts of the world. These include conducting roadshows to showcase Hong Kong as the offshore RMB business centre, as well as facilitating private sector-led forums and dialogue meetings with authorities in Australia and London. These and other initiatives have encouraged actions to enhance various financial services, including RMB liquidity management and settlement arrangements, between markets in different parts of the world. Concluding remarks As I mentioned at the outset, I had the privilege of delivering the keynote address at last year’s Global Offshore RMB Funding Forum as well.
Where these have been general concerns - often reflecting the rapid evolution of the market place or rising public expectations - they have mostly been addressed by reinforcing the rules of the game. Or where they have reflected the behaviour of individual firms or their employees they have been pursued - not least to encourage others. Of course we need to remain constantly vigilant in all these areas to retain confidence in our market place. But all the evidence suggests that such confidence remains strong by any international standards. There are three characteristics of the City’s market ethos that I would point to in particular. Quite early on in my career at the Bank - more years ago than I care to remember - I was profoundly influenced by the man then responsible for administering Exchange Control - Brian Bennett. He had, framed on his desk, a wartime poster which read “Freedom is in peril - defend it with all your might.” And he explained to me that this was to remind him that his job was not simply to apply the 4 Exchange Control regulations - though that certainly was his job; it was also to help people to do what they were seeking to do consistently with both the spirit and the letter of the law. I like to think that that philosophy has informed - and continues to inform - the approach to applying the rules of the game more generally in the City.

Whereas it was once natural to put money into a normal savings account, this is no longer the case. Today, an increasingly large share of savings is being invested in various securities and the rapid expansion in the mutual fund market is an important part of this development. One only needs to look at the Swedish Mutual Fund Association's own report on mutual fund investment in Sweden to realise this. The statistics show that new mutual fund investment has increased gradually during the 1990s. In 1994 net investment in mutual funds totalled SEK 7.5 billion. Last year the corresponding figure was SEK 99.1 billion. This is an entirely natural development, as it has been possible to obtain a significantly higher yield from savings invested in various types of securities than from savings paid into a traditional savings account. Swedish investors have not only realised this, they have also understood how to use the financial market to spread their risk by investing money both in fixed income funds and in shares in different types of companies within different sectors and countries. Many people, including me, see this development as a positive thing; others are critical and express concern over what they call an insensitive fund capital, shovelling money around the world and quickly withdrawing from countries that show the slightest sign of problems. This criticism cannot be completely dismissed, but I do feel that it often does not fully take account of the importance of the financial sector for economic development.
This is not only misguided; it misses a valuable opportunity for organisations to design operations in a way that would enhance an organisation’s ability to reinvent itself as circumstances change, and achieve wider options for recovery in a business disruption scenario. At its most basic level, building resilience is about helping organisations better understand their operational and financial interdependencies and how this can affect their ability to recover and respond to disruption and change. This not only assures an organisation’s own survival, but enhances its prospects for creating value. Development priorities for insurance and takaful In speaking on innovative risk management, I would be remiss not to touch on the Bank’s development priorities in the Malaysian insurance and takaful sector to support risk management by businesses. Let me mention some of the ongoing initiatives that are relevant to those in this 4/5  BIS central bankers' speeches  room today: · We are raising professional standards for insurance brokers to improve the quality of advice and risk information provided to risk and insurance managers; · We are reviewing existing industry arrangements to further develop domestic underwriting capacity for large and specialised risks; · We are progressing a review of capital requirements to further strengthen the resilience of insurers and takaful operators to support more complex and diverse risks; and · We will continue to facilitate access to the domestic insurance market by strong global insurers that can bring new and innovative risk solutions to meet the needs of Malaysian businesses and reduce insurance outflows.

James McAndrews: The economy and the household debt and credit report Remarks by Mr James McAndrews, Executive Vice President and Director of Research of the Federal Reserve Bank of New York, at the household debt and credit press briefing, New York City, 28 February 2013. *  *  *  Good morning and welcome to the New York Fed. I am pleased to have this opportunity to talk with you about some of the exciting research we are doing here at the Bank. This morning my remarks will focus on national economic conditions and then I will introduce our special presentation today on household debt and credit conditions. What I have to say reflects my own views and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System. National economic conditions It has been three and one half years since the end of the “Great Recession.” But, the pace of this expansion so far remains very sluggish compared with previous post-World War II business cycles: the level of real gross domestic product (GDP) in the fourth quarter of 2012 was only around 2½ percent above its previous peak in the fourth quarter of 2007. To put this into perspective, at this point in time following recessions in 1973, 1981, 1990 and 2001, the level of real GDP ranged from 14 percent to 18 percent above the previous cyclical peak.
There have been over 9 million reported cases of Covid globally and over half a million reported deaths, around 0.01% of the global population.1 As a point of comparison, the Spanish flu of 1918 recorded 33 million deaths or close to 2% of the global population back then.2  During the first few months of the year, and unlike in 1918, most countries put in place social distancing measures to contain the spread of the virus, albeit at different times and with differing degrees of stringency (Chart 1). Predictably – indeed, intentionally – these measures severely curtailed movement of goods, services and peoples, constricting economic activity across a very wide range of sectors and countries. 1  Data from European Centre for Disease Prevention and Control. Estimates of the death toll are uncertain. The number quoted here averages the mid-range of estimates in Patterson and Pyle (1991), Johnson and Mueller (2002) and Spreeuwenberg et al (2018).

HB: What needs to be changed? Trichet: We certainly do need change in Europe – fundamental change. Not only in the area of surveillance and monitoring of fiscal policy, but also as regards structural reform policies and competitiveness policies. HB: Examples? Trichet: We need to improve drastically everything: the quality of the diagnosis and recommendations by the Commission, much more stronger procedures – and where necessary automatic procedures and tools – to prevent ex ante bad policies, and much more effective sanctions ex post. I will make all these points with the greatest energy in the Van Rompuy Committee. HB: Will the measures adopted by the ECB now dampen growth in Europe? Trichet: No. It is a complete fallacy to say that fiscal soundness dampens growth. It is exactly the contrary. It is the absence of fiscal credibility which dampens growth. Medium term sound and credible fiscal policies are a major prerequisite for confidence. And confidence of the households, confidence of the entrepreneurs and confidence of the investors is what is indispensable for the recovery. HB: Did you ever think that you would have to take such difficult decisions as President of the ECB? Trichet: I have had to take difficult decisions throughout my career – including as President of the Paris Club in the 80’s and Chairman of European Monetary Policy Committee in the 90’s as well as Governor of the Banque de France.
Caught in this cross-fire, higher leverage became banks’ only means of keeping up with the Jones’s. Management resorted to the roulette wheel. As firms collectively migrated South-east in Chart 3, leverage increased across the financial system as a whole. Having bet the bank on black, many financial firms ended up in the red. Two lessons for the future suggest themselves from this prognosis. First, when evaluating banks and their management, there is a need for greater focus on returns on assets rather than on equity. Good luck and good management need to be better distinguished. Put differently, returns to investors and managers need to be more accurately risk-adjusted if the right balance between risk and return is to be struck for individual firms and for the financial system as a whole. Second, there is a need to place much stricter system-wide limits on leverage. These limits should aim to prevent the South-Easterly migration by banks under competitive pressure. 1  Charles McKay (1841), “Memoirs of Extraordinary Popular Delusions and the Madness of Crowds”, London: Richard Bentley. 2  BIS Review 85/2009  That suggests these ratios will need to be state-dependent, rising as the temperature rises across the financial system as a whole. Some have called this a counter-cyclical regime. Given its source, it might better be called a counter-cultural regime. Lesson 3: Size does matter The “80/20 rule” has its origin in the study of contagious diseases. For a number of diseases, 20% of the population account for around 80% of the disease spread.

They seem to perceive that raising equity is, in some sense, costly. Perhaps they are right. But, equally, it is possible that these perceptions are distorted – for example, because the cost of equity is mistaken for the total cost of banks’ capital, or because managerial and shareholder incentives are linked to equity rather than asset returns, as outlined earlier. Either way, the MM hypothesis needs to be objectively reassessed in a banking context. And until then, stress tests need to be administered with a healthy dose of realism. Lesson 5: The plumbing worked With so much having gone wrong during this crisis, it is easy to overlook what has gone right. Well-functioning payment and settlement systems – the plumbing of the financial system – are one such unheralded success. To my knowledge, there are no examples of these systems collapsing under the strain of the financial crisis. This is no small achievement. Pressures on participants within payment systems have been acute. And volumes flowing through these systems have picked up sharply during periods of volatility in asset prices – for example, in the foreign exchange settlement system CLS (Chart 8). The robustness of these systems is no fluke. It is testimony to the efforts made over the past twenty of so years, initially by central banks, to proof these systems against systemic risk. These developments included the introduction of real-time gross settlement (RTGS) in payment systems, delivery-versus-payment (DvP) in securities settlement systems and payment-versus-payment (PvP) in foreign currency settlement systems.
To make loans more accessible for small and medium-sized businesses. Underdeveloped competition and banking systems hit small and medium-sized businesses. QUESTION from Bloomberg: Two questions, if I may. Question one. The Bank of Russia had several options before this 13 / 14  BIS central bankers' speeches  meeting: to maintain the key rate, to cut it by 25 bp or to cut it by 50 bp. How unanimous was the decision to reduce the rate by 25 bp? Did anybody want to keep the rate unchanged? And, question two. As long as non-monetary policy-related questions have already been asked, may I also have one? According to Novaya Gazeta, roughly $ billion was withdrawn from Russia in 2011–2014 under the so-called Moldova scheme, whereby money was withdrawn under court rulings. The Moldavian party claims that Russia did not assist but in fact impeded the investigation. Was the Bank of Russia aware of this, and were you monitoring it somehow or countering cash withdrawals in any way? Thank you. ELVIRA NABIULLINA: Thank you very much. Indeed, we discussed different options about whether to keep the key rate or reduce it, we analysed the pace of reduction, all the economic data and our forecast. The final decision to cut the rate by 0.25 pp was unanimous. As far as the Moldova scheme is concerned, it was one of the first dubious transactions we countered. We almost eliminated it and revoked licences from banks actively involved in the Moldova scheme.

Since the start of the year, we have observed that market-based measures of inflation expectations have fallen. Nevertheless, the latest forecasts provided by the ECB continue to point to a gradual rise in inflation over the coming years: 0.1% in 2016, 1.3% in 2017 and 1.6% in 2018. c) Some argue that these challenges mean that the Eurosystem can no longer achieve its price stability mandate. I don’t think so. Current challenges do not call into question our mandate, but they change the way in which we fulfil it. Some argue that the Eurosystem should rather change its objective. I don’t think so either. For the credibility of monetary policy, this objective must be maintained: this 2% target is a medium-term “anchor”, at a time when there is so much volatility and short-termism affecting the economy. Most central banks in advanced economies share this medium-term 2% objective, including the United States and Japan. This has been the ECB’s objective since 2003, when it was proposed by the German former chief economist, Otmar Issing. II. This brings me to my second point: how effective is our monetary policy? a) Since the summer of 2014, we have implemented a series of non-standard monetary policy measures to complement cuts to key interest rates. These non-standard measures have produced tangible results. They have translated into a substantial easing in borrowing conditions for euro area companies. Since June 2014, the cost of borrowing for businesses has fallen by 80 basis points.
Chart 11 provides an assessment, drawing on IMF analysis, of the evolution of structural deficits and surpluses for two alternative scenarios, with the red dashed line corresponding to an assumption that supply impairment in the advanced economies as a result of the crisis is minimal (and therefore output gaps are correspondingly large), whereas the blue dashed line – which corresponds to the IMF’s central case – assumes a relatively high degree of supply impairment (and therefore substantially smaller output gaps). In the former case, the bulk of the post-crisis narrowing in imbalances is attributed to cyclical factors, whereas in the latter they are attributed to structural factors. Clearly, depending how one reads the data, one can arrive at a different conclusion. An alternative way into this is to look at what has happened to relative prices, rather than quantities. A natural counterpart of a rotation in demand from the advanced to the emerging world should be a fall in the real exchange rates of the former and a rise in those of the latter. By increasing the profitability in deficit countries of producing internationally tradable goods and services relative to that of non-tradables, that should facilitate the necessary shift of resources between sectors. The opposite is true for the emerging economies. Chart 12 shows such a shift has taken place since before the crisis, with both sterling and the dollar depreciating in real terms, and the renminbi appreciating.

Generally, Macedonian economy has been relatively successful in offsetting the crisis consequences which was mainly due to the solid initial conditions prior to the crisis without massive macroeconomic imbalances, the establishment of few new production capacities based on foreign capital that largely contributed to the export diversification, stable and sound financial system and adequate macroeconomic policy mix. The environment for monetary policy implementation in 2013 is quite favorable, considering relatively stable inflation developments and comfortable foreign reserves level. In the first half of 2013, the average inflation was 3.6%, mainly due to higher food and energy prices. Our latest forecast for the average inflation rate in 2013 is 2.8%, with expected further slowdown to 2.3% (close to our historical level) in 2014, until when no pressures of higher significance by the demand side are being expected. However, there are risks related to this forecast, reflecting the uncertainty about energy prices as well as the world and domestic food prices dynamics and their direct and indirect pass-through to inflation. The performances in the external sector in the first several months of 2013 and the latest estimates indicate quite favorable position in the balance of payments for this year. The reduced trade deficit is neutralizing the lower net inflows through private transfers. Therefore, the current account deficit in 2013 is expected to remain moderate at 4.2% of GDP, which is similar to the previous year.