samchain/econo-pairs-v1 huggingface dataset:
Jan F Qvigstad: On learning from history – truths and eternal truths Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at the Norwegian Academy of Science and Letters, Oslo, 13 November 2012. The text below may differ from the actual presentation. This speech does not contain assessments of the economic situation or current interest rate setting. *  *  *  I have received valuable assistance in preparing this speech. Outside the Bank, I would like to thank Mike Bordo, Marc Flandreau, Henrik Mestad, Henrik Syse and Knut Sydsæter. At the Bank, I would like to thank the following persons in particular for their contributions: Øyvind Eitrheim, Amund Holmsen, Jon Nicolaisen, Øystein Olsen, Øystein Sjølie, Birger Vikøren NS Mari Aasgaard Walle. I would also like to thank Helle Snellingen for her contribution to the translation of the text into English. Introduction All scientific and scholarly disciplines have a particular, and not immutable, set of truths. Mathematics and theology are possible exceptions, though for different reasons. As the late Professor Knut Sydsæter underscored when assisting me with this speech; in mathematics new results are proved on the basis of fundamental axioms and become new truths. Theology also relies on truths, even eternal truths. Even if logical proofs of God’s existence have long been an important pursuit, it is safe to say that the truths in theology today stem from faith.

To keep up with the changes and reap the benefits without leaving the majority of people behind, financial services should serve the real economy to promote sustainable well-being of the public at large. The complementary roles of banks and capital markets to enhance “Productivity, Immunity, and Inclusivity” will definitely generate desirable outcomes. On that note, I wish you all a successful and productive conference and an enjoyable stay in Thailand. Thank you for your attention. Sawasdee Krub  6 Source: http://www.un.org/apps/news/story.asp?NewsID=52992
At the onset of the crisis, governments along with financial regulators have deployed sizeable stimulus packages and various assistance programmes in order to contain the crisis and stabilise the economy. This includes addressing demand and supply disruptions, maintaining cash flows and keeping workers employed. In Malaysia, the total stimulus package amounted to USD 73.55 billion (RM3056 billion) with an additional fiscal injection by the government totalling 1/4  BIS central bankers' speeches  RM45 billion. As at September 2020, a total of 2.63 million workers and 321,000 employers had benefitted from the Wage Subsidy Programme, involving an expenditure of RM10.4 billion. To provide further stimulus to the economy, the Bank has reduced the overnight policy rate (OPR) by a cumulative 125 basis points (from 3.00% to 1.75%) this year, alongside reduction in the statutory reserve requirement by 100 basis points (from 3.00% to 2.00%). The reduction in the OPR is intended to provide additional policy stimulus to accelerate the pace of economic recovery. The financial industry, including Islamic financial institutions, also lent support to their borrowers and customers. In the first half of 2020, a total of RM120 billion7 was disbursed in lending/ financing to SMEs, with more accounts being approved8 in aggregate in 2020 compared to the same period in previous years. Islamic financial institutions and related associations have been actively educating and reaching out to affected borrowers about the financial assistance programmes available in response to the pandemic.

What the world will look like in 2050 will be partly shaped by the future of Europe; and the future of Europe depends on the decisions we take now. Of course, we always face the risk of failure when conducting far-reaching reforms. Yet we cannot afford another missed opportunity and we have to act swiftly without losing a longer term view. For the Euro area, for its citizens, 2016–2017 is the decisive time to act. 4  4  Interview of Robert Mundell by Laura Wallace, « Ahead of his time », Finance and Development, IMF, September 2006, vol 43, n° 3. BIS central bankers’ speeches  BIS central bankers’ speeches  5
This requires designing policies to support the development of markets’ size and scope, removing barriers between EU capital markets, expanding sources of funding for companies, and broadening the role of the non-bank financial sector. Ultimately, a well-developed CMU will increase private risk-sharing, promote financial stability and boost economic growth. Starting in 2015, the European Commission launched a series of initiatives to stimulate the development and integration of EU capital markets. On market development, the Commission adopted a set of harmonised rules on securitisation and published its fintech action plan in 2018. Initiatives on market integration included the review of the European Supervisory Agencies and the covered bond legislative package. The former aimed to make our system of financial supervision more efficient and effective and also gave the European Banking Authority a coordinating role in the areas of anti-money laundering and terrorist financing. The latter should foster the development of covered bonds by creating a harmonised EU framework, providing a source of long-term financing for banks and supporting the real economy across the EU. Despite the efforts of policymakers and market participants, retail investors are far from having embraced investing in capital markets. While the full impact on the real economy may take time to materialise, it is concerning that the initial ambitions of the plan launched by the European 3/5  BIS central bankers' speeches  Commission towards the development of a CMU were significantly lowered to enable colegislators to reach an agreement.

For other types of financial activities, no specific regime for accessing EU markets has been established. This is not unusual: most if not all countries place some restrictions on the types of financial services that can be provided across their borders. There may be good reasons for these restrictions, such as consumer protection or financial stability considerations. In the case of the EU, certain bank lending and deposit-taking activities are not covered by the so-called 2/5  BIS central bankers' speeches  third-country regimes and so will no longer be able to be provided from the United Kingdom, but will need to be provided from within the EU. This – together with the fact that equivalence cannot be taken for granted – is why many banks have chosen to relocate activities to the EU27, and have been engaged in very detailed discussions with the ECB and other authorities to obtain agreement on their plans. The ECB expects banks to build up their capabilities in EU27 countries and to implement the agreed relocation plans within the previously agreed timelines. The risks of financial fragmentation Regulatory drivers – and in particular the end of passporting rights for certain UK-based activities – are already having an effect on the geography of financial centres in the euro area. According to preliminary evidence, a small number of financial hubs appear to be emerging as a result of the relocation – or plans for relocation – of certain activities.
If these externalities are large, and if equity avoids them, there is an economic case for tax non-neutrality. In the 19th century, subsidising debt to finance investment, including through tax, was a sensible growth strategy. A century on, the opposite is true. Today’s debt ratios, both private and public, are at levels which are likely to damage medium-term growth (Reinhart and Rogoff (2009), Cecchetti et al (2011)). There may have never been a better time in history to consider re-tilting the fiscal scales. (b) Equity-like liabilities No amount of additional equity removes the asymmetry of payoffs under limited liability. Indeed, some have argued that materially higher levels of equity capital could even encourage tail risk-taking (Perotti, Ratnovski and Vlahu (2011)). Nor, by itself, would higher equity guarantee discipline by debt-holders. So are there non-equity means of reshaping risk incentives on the part of debt-holders and shareholders? BIS central bankers’ speeches  11  One possibility would be to use financial instruments which explicitly combine the incentive features of debt and equity – so-called contingent convertible securities or CoCos (Flannery (2010), Calomiris (2011)). These instruments are debt in good times, but convert to equity in bad. As Figure 3 illustrates, they would result in a combined payoff schedule which mirrors unlimited liability, without its obvious practical drawbacks. In other words, CoCos could generate better risk incentives than either debt or equity in isolation. To play this role, however, these instruments would need to be time-consistent.

It just happened to be the prevailing capital ratio among US banks at the time the first Basel capital accord was struck. More recently, the Basel Committee has explored the costs and benefits of higher capital ratios (Basel Committee (2010a)). Using conservative estimates of the benefits, that study suggests an optimal capital ratio in the region of 13–14%. One area of conspicuous conservatism is the study’s assumption that higher capital will not lower banks’ equity and debt-servicing costs. Reworking the arithmetic to include these and other effects, Miles et al (2011) calculate an optimal capital ratio closer to 20%. These studies are technically complex. A simpler way of posing the question is to ask what it might take to avoid a repeat crisis performance under the new rules. The average risk weight for a global bank is 40%. This means that a 10% capital ratio in risk-weighted terms translates into bank leverage of 25 times equity. So even once Basel III is in place, an unexpected loss in the value of a bank’s assets of 4% will be sufficient to render it insolvent; much less than that to render it illiquid. For me, that argues for bolstering further banks’ capital defences over the medium term. Basel III is a good starting point, but may not be the right finishing line. Leaning against that are those arguing “equity is expensive”. They seem to me to have two unassailable arguments on their side. One is tax. The other is state subsidies.
I recall, by the way, that I said roughly the same thing two years ago, when I was regarded as being a dove. It may also be worth noting that I am not the only one who from time to time prefers a higher or lower repo rate path than the published one. The same applies to market expectations regarding the future repo rate. For instance, during most of 2009 market expectations were largely above the Riksbank’s repo rate forecast. Since the beginning of 2010 they have instead been below our path. In this context it is important to point out that there is no “true” measure of market expectations of monetary policy. The expectations I am talking about here are the expectations of the repo rate that can be read from forward rates. To produce these expectations, one must among other things adjust for various types of premium in the forward rates, and there is no obvious way of doing this. So one should remember that discrepancies between the Riksbank’s repo rate forecast and market expectations as understood from forward rates could be due at least in part to measuring problems. Regardless of these difficulties, it is also worth emphasising that there are no particularly strong reasons to believe that the market is always “right”, in the sense that the repo rate the market is expecting is the one that will be realised.

This cannot go on for ever, and if there is a sudden turnaround it could have substantial negative effects on the real economy. This applies in particular if a situation were to arise where house prices fall and households’ net wealth shrinks. Once households have reached a situation where they consider that they need to consolidate their balance sheets by reducing their debts, it is difficult to break off this process with the aid of monetary policy. This can be clearly seen in the United States right now, for instance. I do not believe in a wait-and-see strategy that could mean that the repo rate needs to be raised even faster further ahead. A slightly higher interest rate now could make households begin to adjust and contribute to a more subdued development. To me, this is a wellbalanced monetary policy. This is fairly self-evident, but let me nevertheless emphasise: My aim is of course as always to try to attain the Riksbank’s objectives – that inflation and inflation expectations should be firmly anchored around the target and that developments in the real economy should be stable. But to achieve this, I would like to take into account risks that I perceive exist and to put them in a slightly longer perspective than the usual forecast horizon – as I currently see good reason to do this.
High real wage increases despite moderate nominal pay increases are one factor that has undoubtedly increased the support of wage earners for the price stability objective. The fact that the price stability objective has been confirmed by law has also probably contributed to confirming confidence in the inflation target. However, the Riksbank has a pedagogical and practical problem. Monetary policy decisions are based on assessments of inflation a couple of years ahead and are focused on achieving the inflation target during that period. This means that we can often be compelled to increase the interest rate despite the actual rate of inflation at the time being under the target. In December last year, for instance, the Riksbank increased interest by 25 points despite inflation then being at 1.4 per cent. Decisions are then made on the basis of forecasts over a two-year horizon. The most important reason for not waiting until inflation actually exceeds the target is that inflation expectations would then risk accelerating since it takes up to two years before monetary policy has its full effect. And then we may – to rein in inflationary expectations again – be compelled to tighten up the economy more than we would have to have done if we had reacted earlier. The Riksbank’s way of conducting monetary policy obviously plays an important role with regard to maintaining confidence in price stability. However, we should not forget that fiscal policy also has to be conducted in a way compatible with the price stability target.

The public bank was tasked with estimating the value of the 500 or so different coins that were around and exchanging them with its own currency, the rijksdaalder. By having a single currency, the highly chaotic system was improved, and the bank quickly became a hub for settling international payments.2  The modern banknote In Sweden, problems with the coin system were of a different kind. At that time, Swedish coins were made of copper, not gold or silver. As a consequence, they had to be quite sizeable, as their value still depended on the metal used. Obviously, this made daily purchases a fairly heavy exercise. But again, great ideas seemed to come to our rescue when Latvian-born Dutchman Johan Palmstruch, with the blessing of Charles X Gustav, set up Stockholms Banco to issue the first ‘modern’ European banknotes. This was in 1661. However, Mr Palmstruch hadn’t thought it through properly. Or at least, he had underestimated the collateral needed to operate a business like that. When people started to queue up outside the bank to have their notes redeemed, he quickly ran out of metal. The bank was liquidated in 1667, and poor Mr Palmstruch was imprisoned, though reprieved from his initial death sentence. The year  2 See, for example, Gerarda Westerhuis , and Jan Luiten van Zanden, ‘’Four Hundred Years of Central Banking in  the Netherlands, 1609–2016’’, in Sveriges Riksbank and the History of Central Banking (2018): 242–264, for more about Amsterdamsche Wisselbank.
Notes: Pink diamond represents October 2021 inflation outturn. Energy prices are also the biggest driver of the sharp decline in CPI inflation forecast from the middle of next year, contributing 2.7 percentage points of the forecast fall of 5.7 percentage points in CPI inflation to 5.2% in 2023Q4. Volatility of gas prices has also been a key feature. Greater security of European supply through this winter has helped ease pressures but there remains significant concerns about next winter, and in November the MPC flagged that a persistently higher path for energy prices remains a possible alternative scenario. And given the uncertainties and balance of upside risks, we incorporated an historically large upside skew on our inflation forecast. Sustained labour market tightness Back at the time of the November 2021 MPR, most MPC members were concerned that the end of the furlough scheme could be material for near-term developments in the labour market, as some of the estimated 1 million workers still on furlough when the scheme ended in September 2021 moved into unemployment. The November MPR forecast was for unemployment to rise to 4.5% in 2021Q4. As the economy recovered, employment remained resilient and unemployment fell to 4.1% after the end of the furlough scheme, only slightly higher than its level prior to the pandemic in Q4 2019.

In Norway, this resulted in a period of low nominal interest rates set by the government authorities, direct regulation of credit through quotas set out in a separate credit budget, channelling of loans for special purposes via state banks, regulation of cross-border capital movements, a fixed but adjustable krone and occasionally the use of price and wage regulation. For a period, regulation and fine-tuning seemed to be having the intended effect. But in the 1970s, inflation got out of control in Norway and in a number of other countries. The Norwegian economy experienced a price/wage spiral. Although the krone was devalued several times in the 10-year period from 1976 to 1986 in pace with high price and wage inflation, this was nonetheless not sufficient to prevent a decline in the manufacturing sector. In 1980, Odd Aukrust, Head of Research in Statistics Norway, stated the following with regard to developments in the Norwegian economy: "Unfortunately there is even less reason for optimism this time. It seems that competitiveness in Norwegian manufacturing will deteriorate in the year ahead. The main problem is that no one can control price  4  See Ecklund (2008), p.120. BIS Review 111/2008  3  developments. With annual inflation at approximately 10 per cent, no one dares to invest in measures that could stop this price carousel.” 5 High inflation showed that the economic policy framework was not functioning as intended, and the importance of providing the economy with a nominal anchor became evident.
We aim to finalise our policy on Open API for the banking sector around the end of the year. We believe that the wide adoption of an Open API framework would promote collaboration between banks and tech firms, a crucial element for stimulating innovations and improved services for customers in Hong Kong. (F)  Cross-border Collaboration in Fintech  As an international banking and funding centre, Hong Kong must promote the use of fintech in managing cross border financial flows. The HKMA is in close dialogue with several authorities in other jurisdictions to collaborate in this area. As the first step of strengthening our cooperation within the Guangdong-Hong Kong-Macao Bay Area, we are partnering with Shenzhen to promote fintech and talent developments. We are also discussing with other centres in the Bay Area to strengthen collaboration in fintech. More details will be announced later. Separately, the HKMA is working with the banking industry to develop a Distributed Ledger Technology (DLT) platform for digital trade finance. We also hope to be able to announce soon the details of our collaboration with Singapore in linking up our respective trade platforms. This DLT initiative, if implemented, should bring significant benefits to financiers, importers and exporters by enhancing the transparency of cross-border trade finance processes, improving operational efficiency and reducing the risk of frauds.

The adoption of Open API has facilitated very rapid innovations that help provide personalised services and much better customer experience. Recognising these technological innovations and rising aspirations of customers for more personalised and integrated services, Hong Kong must proactively embrace the trend and seize the opportunity to upgrade our banking system. To prepare us to move to the new Smart Banking era, I am pleased to announce that the HKMA will take the lead and launch the following seven initiatives:  2/6  BIS central bankers' speeches  (a)  (b)  (c)  (d)  (e)  (f)  (g)  full connectivity of digital retail payments through the Faster Payment System;  upgrading of our existing Fintech Supervisory Sandbox 1.0 to Version 2.0;  facilitating the introduction of virtual banking in Hong Kong; a new Banking Made Easy initiative to reduce regulatory frictions and improve customer experience; development of an Open API framework;  stepping up cross-border cooperation in fintech; and  enhancing research and talent development. I will now explain these seven initiatives in turn. (A)  Full Connectivity of Digital Retail Payments through Faster Payment System  The centerpiece of an efficient retail payment system will be our Faster Payment System (FPS), scheduled for implementation in September 2018. FPS will provide the necessary infrastructure for full person-to-person and person-to-business connectivity not only amongst retail customers but also between businesses and between banks and non-bank payment service providers.