samchain/econo-pairs-v1 huggingface dataset:
Speech  22 September 2022, 5.30 pm  Sixth Karl Brunner Distinguished Lecture Introduction of Benjamin M. Friedman, ETH Zurich  Thomas J. Jordan Chairman of the Governing Board Swiss National Bank Zurich, 22 September 2022 © Swiss National Bank  Page 1/4  Ladies and Gentlemen I am very pleased to welcome you all to the sixth Karl Brunner Distinguished Lecture. The Swiss National Bank established this annual lecture series in honour of the Swiss economist Karl Brunner, one of the leading monetary economists of the last century. Our aim with these lectures is to reach a broad audience, and to contribute to the public debate on issues related to central banking and economics more broadly. This year’s Karl Brunner Distinguished Lecture is special for several reasons. After a threeyear break caused by the pandemic, the lecture finally returns to ETH Zurich. I am delighted to see so many of you here. I also want to thank Joël Mesot, President of ETH Zurich, for making these fantastic premises available to us yet again. Above all, this year’s event is special because of the person giving the lecture. Benjamin Friedman is the William Joseph Maier Professor of Political Economy at Harvard University. He is one of the world’s foremost thinkers on monetary policy and an outstanding public intellectual. In addition, he is among the few still active economists who knew Karl Brunner well. Even though they did not always agree on economic matters, the two maintained a close personal relationship characterised by mutual respect.

Internal Audit does not participate in management decisions, and our General Auditor reports to the Chair of the Audit and Risk Subcommittee of the Bank’s Board of Directors. In addition to defining clear and comprehensive risk management roles and responsibilities using the three lines of defense model, the Bank’s risk framework establishes governance, escalation, and reporting processes around risk exposures, risk decisions, and risk events. A  2  BIS central bankers’ speeches  strong governance regime provides assurance to stakeholders (Management Committee, the President, and the Board) who delegate risk-taking authority to the business lines. From first-line businesses and support functions, risk information flows to the second line, and then to the Risk Subcommittee of our Bank’s Management Committee. The Risk Subcommittee discusses significant emerging and existing risks, provides perspectives on managing and mitigating risks, and supports Management Committee review and decision making. The Audit and Risk Subcommittee of the Bank’s Board of Directors and the Board of Directors itself are at the top of the governance chain, although there are limitations on their roles with respect to supervisory and monetary policy issues. 3 Operational risk management The Bank’s operational risk approach sits within, and is shaped by the Bank’s overall risk framework. Roles and responsibilities as well as escalation and reporting follow the general structure I previously described. At this point, though, I can drill down into operational risk specifics.
But for the time being, and whatever the precise numbers, the overall prospect for the British economy over the next couple of years is for output growth picking up to around trend and inflation to around target. And it was against that background that we left interest rates unchanged at our MPC meeting last week. I gather that the EEF was "deeply disappointed" at that decision, having been hoping for a cut. And I really do understand why, seeing things from the perspective of the manufacturing sector in particular, you might take a somewhat more pessimistic view of the prospects than did the MPC. We are - as I have explained - well aware of the degree of uncertainty inherent in any forecast, and do not pretend we have a crystal ball. But I can assure you that if, as we move forward, it seems likely that the overall economy will be weaker than we currently expect, and inflation lower, then we are prepared to reduce interest rates further, just as we stand ready to raise them if the overall economy, and inflation, appear likely to be stronger than we currently anticipate. Mr President, the past year or so has been a difficult time for the world economy which has made life increasingly difficult for the internationally-exposed sectors of our own economy - including large parts of manufacturing. And things could remain difficult for a time. But it won't last for ever.

It's perhaps less obvious that we cannot control the exchange rate. Many people think that we could weaken sterling against the euro quite simply by cutting our interest rate relative to the interest rate in the eurozone. But it's not as simple as that. The US has reduced its interest rate far more aggressively than the ECB over the past year or so, but the dollar is actually stronger against the euro than it was to begin with; and the same is true, to a lesser degree, of ourselves, here in the UK, with sterling also stronger against the euro (though weaker against the dollar) than it was a year ago. So there was nothing much - as I say - that we could have done directly to affect the weakness of the global economy and the resulting weakness of external demand on the UK. But what we were able to do - given that inflation was marginally below target - was to try to compensate for that external weakness by stimulating domestic demand here in the UK. The Bank sought to do this by cutting interest rates to buoy up consumer spending. And the Government has stepped up its own spending, which is helpful in the present international environment. Although we couldn't avoid an overall slowdown altogether we have managed to keep the UK economy as a whole moving forward despite the recession in the internationally-exposed sectors of manufacturing.
As can be seen, return has been stable with relatively minor variations around just below 9 per cent while the real interest rate has shown a falling trend. After the financial crisis, return on capital has even risen slightly, suggesting good investment opportunities. Investment growth after the financial crisis is in line with such a hypothesis. Figure 4(b) shows that investments have risen relatively rapidly since 2010 and are now close to or above their long-term trend. None of this is easy to reconcile with secular stagnation.7  6 See Gordon (2012). 7 See Gomme et al. (2015) for further discussions. 8 [23]  Figure 4. Real return on capital, real interest rate and investments in the United States 4(a ) Return on capi tal and real interes t ra te  4(b) Investments i n the business sector  10  3000  8  2500 Real interest rate, 5 years Return on capital  6  Investments Investments, nonresidential  2000  4  1500  2  1000  0  500  -2  0  00  02  04  06  08  10  12  14  85  90  95  00  05  10  15  Note. Fi gure 4(a), per cent. Return on capital in the business sector. Broken lines show a verage return on ca pital s ince the year 2000. Real interest ra te refers to 5-year real government bonds. Fi gure 4(b), USD billion.

As a matter of fact, in order to fall to the German level of growth the income measures of most of the troubled “southern” countries would still need to decline by more than one tenth of the growth recorded during the eurozone’s existence, and in some of them it would need to fall by significantly more. As I have become accustomed to a rather more pragmatic interpretation of the benefits of the eurozone, I find it quite difficult to reconcile these two statements. The fact that German citizens are being asked to pay up for a second time makes this second payment a less clear moral imperative than many suggest. d.  BTW, talking about growth we have almost forgotten now that the major “marketing” point of the eurozone project was that it was supposed to speed up EU growth. We have forgotten this because we are, unfortunately correctly, too preoccupied with the fear of the consequences of a chaotic breakdown of this project to have a chance to pause to contemplate and remember. e.  Returning to Germany, one of the neglected features of its export patterns over the past decade is the fact that the eurozone now accounts for roughly 40% of its exports, whereas it used to account for the majority of them (I believe about 60%). f.  Even Germany’s debt is not so low. Its perceived sovereign risk is really low.
2  See also my letter to Nicky Morgan, Chair of the Treasury Select Committee, on 19 March 2019. See ‘Progressing Black, Asian and Minority Ethnic (BAME) talent in the workplace through collaborative action’, “The Middle” Report, available online at: https://www.thebbbawards.com/middle-research/ 3  6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  We have recently decided to provide a seat at the table for our BEEM network at senior committees whenever diversity issues are discussed. And we have launched ‘Let’s Talk About Race’ workshops to help senior leaders become more comfortable talking about these issues. Third, we are ensuring greater accountability for BAME progression throughout the organisation. The Bank has published a huge amount of diversity data externally and internally since we first set diversity targets five years ago. We published our BAME pay gap for the first time in our 2018 Annual Report. We are currently reviewing the metrics we report to make sure they identify hotspots in terms of BAME recruitment, progression or retention. All managers’ participation in the inclusion agenda is assessed as part of annual performance reviews, and Executive Directors have specific diversity performance objectives. Finally, I am very pleased to announce today that the Bank is signing the Race at Work charter. This Charter commits organisations to five initiatives to improve ethnic diversity in the workplace. The Bank now has all five in place.4 Conclusion Choosing inclusion means listening and learning from others. That’s why it is so valuable to have forums like today.

Overall, the past five years have been a period of remarkable stability for the UK. Annual GDP growth has averaged 2.8%, and there have been 35 consecutive quarters of positive economic growth. Since the MPC was set up in May 1997, inflation has averaged 2.4%, very close to our target of 2½%, and been in the remarkably narrow range of 2%-3% in 43 out of the past 49 months. This degree of stability reflects well on the new framework for monetary policy in this country. But if I focus today on the risks ahead, it is not simply because as a central banker I know that to every silver lining is attached a cloud, but because the small deviations of inflation from the target over the past four years give a misleading impression of the greater volatility of inflation that we might reasonably expect to see in future. There are two sources of uncertainty facing the UK at present, one domestic and the other international. Both are related to imbalances. The correction of these imbalances will pose challenges for policy over the next few years. To see the domestic imbalance look beneath the relative tranquillity of the aggregate data to the significant turbulence among different sectors of the economy. It is obvious that there is an imbalance between those sectors of the economy most exposed to international competition and those sectors facing predominantly domestic competition. To describe this as a difference between manufacturing and services is too simple, but the point is clear.
The rise in SWFs is closely linked to the global macroeconomic imbalances that have characterized the world economy since the mid 1990s. Since these imbalances are unlikely to unwind in the near term, SWFs are likely to keep growing disproportionably for some time. The rapid rise of SWFs has undoubtedly brought a number of benefits. One of them has recently become particularly evident. Against the backdrop of the current market turmoil, SWFs have been a welcome source of capital, strengthening the vulnerable balance sheets of some of the world’s largest financial institutions. I will return to this important point at the end of my lecture. But the investments made by SWFs have also given rise to considerable political controversy and media coverage. Slide 2 provides a sample of some of the most pertinent recent headlines. The political controversy does not derive from the fact that SWFs are new. They are not. Political leaders are anxious because the rapid rise of SWFs and their increasing visibility as large investors in mature markets challenge some long-held assumptions about how the global economy works. In the process, the investment decisions of SWFs run the risk of triggering defensive reactions in mature countries. If left unchecked, this process could feed financial protectionism, which would clearly be to the detriment of global economic welfare. To provide some context, I will first describe the rise of SWFs. I will then discuss in more detail what I view to be the primary challenge arising from SWFs.

Sovereign Wealth Funds with assets estimated above 20 billion US dollars  Region  Country  Name  Year of Establishment and Estimated Size Year  Asia  Singapore  Temasek  1974  100b  Singapore  GIC  1981c  100-330b,c  China  China Investment Co.  2007  200b  Brunei  Brunei Investment Authority  1983c  30b  Japan  Announced intension to create one Korea Investment Corporation  n.a. n.a. 2006c  20b  ADIA (Abu Dhabi)  1976c  250-875b  n.a. 1953c  250+b 160-250b  Algeria  Various Kuwait Investment Authority (KIA) and Futures Generation Fund Revenue Regulation Fund  2000c  43c  Libya  Libya Investment Authority  2007a  40a  Qatar  Qatar Investment Authority  2005c  50c  Russia  Stabilization Fund  2003c  127b  1996c  308b  1976c  35b  2004c  42b  South Korea Middle East UAE and Africa Saudi Arabia Kuwait  Other Emerging Markets  Developed Norway Government Pension Fund Countries Global US (state of Alaska) Alaska Permanent Reserve Fund Australia Australian Future Fund Total d:  Size, bn USD, 2007. c  2227.5  a) Source: Financial Times on 18th October 2007, interview with the executive director of the Libya Investment Authority. b) Source: IMF, Global Financial Stability Report, September 2007 c) Source: Truman, Edwin, 2007, "Sovereign Wealth Funds: The Need for Greater Transparency and Accountability", Policy Brief 07-6, Peterson Institute for International Economics.
4.2  Flexible labour markets  The structure of the labour market also plays an important role in strengthening resilience to shocks. It must provide the necessary flexibility for firms to adjust rapidly to changing conditions at home and abroad. A key characteristic of the Swiss labour market is the combination of little layoff protection with a fairly generous unemployment insurance system. If they have to, firms can reduce their workforce with relatively few administrative impediments. Conversely, when the economic situation improves, firms will readily hire new workers again. As a consequence, the outflow rate from unemployment is higher in Switzerland than in most European countries, with the exception of the Nordic countries (figure 7). Another important institution is short-time working. It was used extensively by firms during the crisis. Short-time working enables firms to adjust their labour force to temporary shocks without destroying existing job matches. This is a crucial advantage, especially for businesses operating with a highly skilled workforce. It effectively cuts costs during the downturn while allowing businesses to quickly expand production once demand picks up again. A further key feature of the Swiss labour market relates to the way employers and employees interact. Generally, labour-management relations are good and disruptive strikes are rare. In the context of wage setting, many employment contracts are regulated by collective labour agreements. However, in contrast to the situation in other countries, these agreements are typically the result of consensus-oriented negotiations, with very limited government intervention.

at the time the Federal Law on Currency and Payment Instruments enters into force. If the revision of the Constitution is approved, it will become effective immediately, which means that the SNB will be able to transfer its excess reserves as soon as the implementing bills will be ready. Should the revision of the Constitution fail to pass, the excess reserves would remain on the SNB’s books, and the Bank would then have the responsibility of managing them with the objective of generating more profit for the government. Nothing fundamental would change as far as the possible selling of gold is concerned : gold sales would remain on the agenda. With regard to the sale of gold, the essential element is thus that the Federal Law on Currency and Payment Instruments be passed. The amendment to the Constitution is only important to the extent that it determines where the excess reserves will be administered. 4. Perspectives for the SNB’s gold policy Ladies and gentlemen, I have been talking to you for twenty minutes now without actually giving you an idea what the SNB will concretely do. Given the political uncertainty which still exists regarding the process of demonetisation of gold and the transfer of excess reserves, you will understand that this is neither the time nor the place to set out a sales programme.
Leaving the maintenance of standards to others – to the sell-side, to public authorities and regulators, or (worst of all) to no-one, as happened a decade ago – cannot serve either your interests, or those of your investors. In my remaining remarks, I want first to review the strong progress that has already been made on developing and embedding the Code, including in some buy-side firms. I will then turn to review four specific concerns sometimes heard from buy-side colleagues still unsure about signing up, and set out what I hope will be persuasive responses. Strengthening buy-side adoption is one of the Global FX Committee’s top priorities for the coming year – and we have asked senior figures from both sides of the market to lead that work, working either as individual liaison representatives, or as members of a new buy-side outreach working group. I am pleased to see several of them here today – including David Clark, Robbie Boukhoufane and Richard Purssell – and I know they would be happy to answer any questions you may have, either now or later. Take up of the Global Code: progress so far Before turning to review progress, I must first confess more than a little self interest in this subject.

Dimitar Radev: Eurozone slowdown likely temporary Publication in the MNI based on an interview with Mr Dimitar Radev, Governor of the Bulgarian National Bank, conducted by Mr Luke Heighton and published on 17 May 2019. * * * The eurozone slowdown may prove temporary, the governor of the Bulgarian National Bank told MNI, but whether Europe emerges from the current soft patch by the second half of 2019 is uncertain. "The euro area’s economy beat many economists’ expectations in the first quarter. But the pace and direction of the economy over the coming months and quarters are yet to be seen,” said Dimitar Radev, a member of the European Central Bank’s General Council since his 2015 appointment, noting the persistence of global trade tensions and “political developments” in Europe. "Recent data may be interpreted as signs that the region’s slowdown may be temporary,” he said in an emailed response this week to questions. Asked whether slow eurozone growth pointed to ‘Japanification', he replied: “comparisons with previous historical episodes and other economies do come to mind when we observe prolonged periods of slow growth, very low interest rates and aging population in Europe." "Policy responses may be effective only as long as they target structural areas, such as education, labour market and pension reforms. The focus needs to remain clear: to stimulate productivity and competitiveness,” he said, calling for more growth-oriented fiscal policies. "This does not necessarily mean higher spending. Moreover, higher spending would be counterproductive in countries with no fiscal space."
This is a remarkably favorable picture; and yet there is growing concern about the long-term challenges for the U.S. economy and their implications for future prosperity. In parts of the business community, there is growing anxiety about a perceived shift in the locus of dynamism and growth away from the United States toward Asia and other parts of the world. Public opinion surveys report increased concern among Americans about economic security; about the prospects for future income growth and economic mobility; and about the implications of the long-term increase in income inequality. And there we can see growing concern among the general public and in the business community about the struggle to find a political consensus to support reforms to help us meet these challenges. The United States has long been one of the most open of the major economies. This basic policy choice, along with a range of other actions that have made our economy relatively flexible, has allowed us to be a substantial beneficiary of the rapid increase in global economic integration and in the growing economic success of the rest of the world. Globalization has brought challenges as well as benefits, however. The combined forces of technological change, immigration, and the rapid integration of China, India, and other economies into the world economy are altering the dynamics of competitive pressures on U.S. companies. The pace of change seems to be increasing, and more things we produce, and more of our services, are becoming tradable.

Luis de Guindos: Key vulnerabilities for euro area financial stability Remarks by Mr Luis de Guindos, Vice-President of the European Central Bank, at the meeting of the Financial Stability Contact Group, Frankfurt am Main, 2 October 2019. * * * Let me start by thanking you all for participating in this meeting of the Financial Stability Contact Group. These meetings are a key feature of the ECB’s market intelligence gathering activities. The financial stability environment has certainly remained challenging since this group last met in March. The global economic outlook has worsened since then, and political and policy uncertainty has increased in a number of areas. Taking this into account, we continue to see four key vulnerabilities for euro area financial stability: (i) first, a risk of mispricing of some financial assets; (ii) second, high public and private sector indebtedness in several countries; (iii) third, in view of banks’ subdued profitability outlook, we see a risk of hampered bank intermediation capacity; and (iv) fourth, vulnerabilities stemming from increased risk taking in the non-bank financial sector. We see the likelihood of these vulnerabilities unravelling in a disorderly manner over the next 18–24 months as remaining largely unchanged. This is because the now widely expected “lowerfor-longer” interest rate environment mitigates many of the possible triggers for corrections over the short to medium term.