samchain/econo-pairs-v1 huggingface dataset:
Zeti Akhtar Aziz: Global trends for the emerging market economies Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 22nd ACI Asia-Pacific Congress on Financial Markets in the K-economy, Kuala Lumpur, 31 October 2002. *  *  *  The recent decade has experienced a dramatic transformation of financial markets with far reaching implications on the growth prospects for the global economy. The single most important source of this change has been the rapid advancement in technology. Indeed, the revolutionary process brought about by the advances in technology has created new challenges and opportunities. These developments have been reinforced by the process of financial deregulation and liberalization. The recent decade has also witnessed a new wave of international crises, although in the more recent episodes, widespread contagion has been contained. Nevertheless, with highly volatile financial flows and heightened uncertainty in the global financial markets, the potential for contagion remains. It is my pleasure to be here at this 22nd ACI Asia Pacific Congress on Financial Markets in the K-economy. In this more globalised, digitised and knowledge-driven environment, the challenge of restoring calm in financial markets is no longer a challenge being encountered by small emerging market economies alone, but is also a challenge being faced by the larger advanced economies. These developments have indeed tested policy makers across the globe.

The economies were affected by factors such as swings in commodity prices, significant oil price adjustments, and the slowdown in the major economies. While the impact of these trade - related shocks on the domestic economies of the East Asian countries involved costs, in terms of slower growth and dampened domestic economic activity, these economies were able to adjust to the sudden changes. In such an environment, there was also greater predictability in the direction of the economic trends, providing the basis on which appropriate policy responses were implemented to manage the economic adjustment process. Emerging economies in particular, in the East Asian region participated in this globalisation process and benefited from the enhanced trade activities. In the recent decade however, there has been a distinct change in the nature of the globalisation process. Globalisation is no longer confined to trade and direct investment, but increasingly involves large cross- border financial flows. Over the recent decade, these financial flows have dominated the global market place. An emerging concern is that this trend would result in a widening of the divide between the developed and emerging and developing economies. In a world in which the magnitude of the financial flows are significant, in which the financial transactions have instantaneous implications, in which the flows are unconstrained by any regulatory framework, then size, the degree of development and the degree of resilience of economies will matter.
My deliberations at the September meeting Let me now discuss in slightly more detail the deliberations that lie behind my personal stance with regard to monetary policy this summer and autumn. Part of the recent debate has concerned whether the repo rate path advocated by the Riksbank is too high. This debate has arisen partly because the market appears to believe that the Riksbank will not raise the repo rate as quickly and as much as we ourselves are forecasting, and partly because the Executive Board members have recently had differing opinions on what level is appropriate for the repo rate now and in the coming period. I have noted that the fact that I have advocated increasing the repo rate has meant that anyone who now reads some reports in the media about the activities of the Executive Board may gain the impression that I am an inveterate “hawk”, perhaps even some form of iron lady who is ready to quash any tendency towards an economic upturn. To modulate this picture, I  2  BIS Review 134/2010  would like to point out that immediately prior to the crisis, in summer and autumn 2008, I actually entered reservations against what I considered to be the excessively tight policy advocated by the majority of my colleagues. So the idea of putting Executive Board members into compartments, or perhaps rather cages, and expecting us to stay there, is not usually wise, at least not with regard to me.

4  BIS Review 134/2010  Reflections on judgements and monetary policy decision-making This leads me on to a slightly broader question regarding judgements and how they fit into the monetary policy deliberations. Let me therefore conclude with a few words on my views on this and how I approach a repo rate decision. It is sometimes claimed in the economic debate that we at the Riksbank rely too heavily on economic models and that this can lead us to make the wrong decision regarding the repo rate. My opinion is that economic models are important and absolutely necessary aids. They organise ideas and ensure that we have consistency in our analysis of inflation, production, interest rates, employment and so on. The models also help to identify weaknesses in one’s reasoning. The Riksbank has sophisticated models that provide good forecasts in themselves, but that also allow us to “experiment” with different repo rate paths and examine potential scenarios. Without these possibilities the preparation process would not function as smoothly as it does now. But of course this does not mean that we merely push a button, lean back and buy exactly what the models come up with. This is not how monetary policy decisions are made. And I don’t believe anyone would claim this was a good way of making these decisions. However good and sophisticated the models are, they are nevertheless simplifications of reality. They must therefore always be supplemented with judgements.
I am convinced that, under the circumstances, the SNB’s monetary policy is currently the approach that best serves Switzerland’s overall interests in the long term. At our most recent quarterly monetary policy assessment, we therefore decided to maintain our expansionary monetary policy. The interest rate on sight deposits at the SNB is unchanged at –0.75%. At the same time, the SNB will remain active in the foreign exchange market, in order to influence exchange rate developments where necessary. Despite a slight depreciation, the Swiss franc is still significantly overvalued and this is reflected in economic activity. Last year, the Swiss economy only recorded year-on-year growth of just under 1%. For this year, we expect growth of between 1% and 1.5%. Uncertainty is high, however, and conditions remain difficult. Last year, inflation was very low, at –1.1%, due in large part to the slump in oil prices and the appreciation of the Swiss franc following the discontinuation of the minimum exchange rate. The impact of both variables is temporary. For this year, we expect an inflation rate of –0.8%. In the SNB’s view, it is essential that, in the medium term, inflation returns to the range compatible with price stability. And, according to our current inflation forecast, that is what will happen. As you can see from slide 12, we are expecting that, given an unchanged threemonth Libor of –0.75%, the inflation rate will return to positive territory next year. This brings me to the end of my speech.

So how do we create a better and more sustainable structure for the financial markets both nationally and globally? I do not have the perfect answers to all of these questions. I doubt that anyone has. But I shall spend the next 20 minutes trying to answer them to the best of my ability. And I hope this will provide a good basis for the coming hearing. Monetary policy and the economic situation The downturn in the world economy has been very rapid and severe – in this way the worst in many decades. Sweden is an export-dependent economy and has been hit hard partly because of this. It will take time before the economy is back at the same level as prior to the crisis. But now we have come so far that the recovery has begun. One important component to which I shall also return is that the conditions on the financial markets have improved. Several indicators are also showing that confidence in the future among both companies and  BIS Review 138/2009  1  households has become much stronger, an important factor in the economic recovery (Figure 1). Figure 1.
This is the pathology I worry most about. So I ask: Can my colleagues and I at the Fed cure this with monetary policy? Obviously, businesses cannot create jobs without the means for investing in job-creating expansion, so, yes, monetary policy is necessary to propel job creation. But as I have shown you tonight, the store of bank reserves awaiting discharge into the economy through our banking system is vast, yet it lies fallow. Take a look at this chart of total reserves of depository institutions: They have ballooned from a precrisis level of $ billion to $ trillion. 2  BIS central bankers’ speeches  There is plenty of money available for businesses to work with. Consider this: In fourth quarter 2007 the nation’s gross domestic product (GDP) was $ trillion; at year-end 2013 it was estimated to be $ trillion. Had we continued on the path we were on before the crisis, real GDP would currently be roughly $ trillion in size. That’s a third larger than it was in 2007. Yet the amount of money lying fallow in the banking system is 60 times greater now than it was at year-end 2007. One is hard pressed to argue that there is insufficient money available for businesses to put people back to work. Now, bear in mind that we at the Fed only control the monetary base (cash plus bank reserves), not the velocity with which money is used.

Consider this graph:  Over the past six years, the monetary base has increased 340 percent, 10 times the rate at which the economy would have expanded in nominal terms had we not suffered the recent recession. One is hard pressed to argue that there is much efficacy derived from additional expansion of the Fed’s balance sheet. This is why I’ve been such a strong proponent of dialing back our large-scale asset purchases. It is my firm belief that the fault in our economy lies not in monetary policy but in a feckless federal government that simply cannot get its fiscal and regulatory policy geared so as to encourage business to take the copious amount of money we at the Fed have created and put it to work creating jobs and growing our economy. Fiscal policy is not only “not an ally of U.S. growth,” it is its enemy. If the fiscal and regulatory authorities that you elect and put into office to craft taxes, spending and regulations do not focus their efforts on providing incentives for businesses to expand job-creating capital investment rather than bicker with each other for partisan purposes, our economy will continue to fall short and the middleincome worker will continue being victimized, no matter how much money the Fed prints. I don’t want to ruin your evening after such a pleasant dinner.
As I said, although in the medium-term immigration should have an expansionary effect on GDP and a limited one on inflation, it is unclear how the supply and demand channels will interact, and which one will dominate as the economy absorbs the population inflow. Second, on the activity side, it is possible for investment to be even more dynamic if larger-scale projects keep coming, but it can also happen that the greater external risks induce a more conservative behavior by entrepreneurs and consumers. Third, the expected evolution of inflation could also be affected if the pass-through of the peso depreciation returns to near average magnitudes earlier than expected and pushes up inflation of CPIEFE goods. Finally, we cannot rule out a faster depletion of the oneoff effects of sectoral supply shocks, particularly the heavier competition in some areas. V.  Final remarks  The global economic scenario poses important challenges to our country. For two years now, events have been unfolding that have added uncertainty to the global growth Outlook, such as the trade conflict between  7  the US and China or the Brexit resolution. Thus, we have seen several episodes in which global markets have been stressed, generating less favorable conditions for the emerging world. The most recent of these events is still underway, putting pressure on economies that are perceived to have weaker macroeconomic fundamentals. Chile, being a small economy, commercially and financially integrated in the world, has not been spared these tensions.

Chilean exports performed well during 2018, partly reflecting an increase in volume exports from all economic sectors in general. Worth noting were shipments manufacturing products, which reached their highest nominal growth since 2011, supported also by the favorable evolution of the international prices of many of these products (figure 7). IV. International scenario  Internationally, there has been a more marked slowdown in growth in the main economies. The data was particularly weak in the Eurozone, with a significant adjustment of trade inside and outside the region in the fourth quarter of 2018. In China, growth went from 6.8% in the first quarter, to 6.4% in the fourth. Moreover, concerns about how intense this global deceleration may become have been exacerbated. Different shortterm activity indicators underperformed the market forecast: the outlook for firms in the manufacturing sector (PMI) has deteriorated, manufacturing output has slowed or even contracted in several economies and international trade has weakened (figure 8). Preoccupation over the weakening of the economies, together with lower inflationary pressures and high financial volatility, resulted in an increase in monetary and/or fiscal stimuli in several countries. In the US, the Federal Reserve took a considerable turn in its monetary policy stance, showing itself open to maintaining its  4  expansionary orientation for some time longer, in contrast to the tighter signals emitted up to the third quarter. This led to a significant decline in US long-term interest rates. which has even translated into reversal of the US yield curve (figure 9).
0112  1011  0711  0411  0111  1010  0710  0410  0110  1009  0709  0409  0109  1008  0708  0408  0108  1007  0707  0407  0107  1006  0706  * CBRT Business Tendency Survey results from the second survey period. 1009  3.0  4  *Calculated using linear interpolation of several maturity yields in the CBRT Expectations Survey. Yields are from the second survey period. Source: CBRT. 4  BIS Review 143/2009  The sharp fall in inflation observed over the past year is not peculiar to Turkey. Inflation rates have plummeted all over the world since the peak of the crisis due to downward pressures arising from demand and cost conditions. Although there has been a slight increase in rates with the removal of the high base effect of the previous year in the third quarter (Figure 11), core inflation data indicate that the main trend of inflation in both developed and emerging markets is downward (Figure 12). Figure 11: CPI in Developed and Emerging Figure 12: Core CPI in Developed and Markets Emerging Markets (Annual Percentage Change)  (Annual Percentage Change)  5  Developed Markets  8  4  Emerging Markets (rhs)  7  4  Developed Markets Emerging Markets  6  3  5  2  3  4  Source: Bloomberg, CBRT. 2.

16  BIS Review 143/2009  Figure 35: Inflation and Output Gap Forecasts* (Percent) Output Çık tı A çGap ığı  Forecast Tahm in A Range* ralığı*  End-year Inflation Targets  Uncertainty Band for 2009  2009 iç in B elirs iz lik A ralığı  Y ıl S onu E nflas y on Hedefleri  13 11  Control Horizon Kontrol Uf ku  9 7  Yüzde  5 3 1 -1 -3 -5 -7 -9 2  3 2009  4  1  2  3  2010  4  1  2 2011  3  4  1  2  3  2012  * Indicates a confidence interval of 70 percent  While better than expected outcomes in food prices necessitated a downward revision in food inflation for end-2009, this effect was offset for the medium term by the upward revision of the assumptions for global economic activity and oil prices, and therefore, there has not been a major change in our forecasts for 2010 and 2011. The revised forecasts indicate that the output gap will not close soon, supporting disinflation even when policy rates are kept at low levels for an extended period. It is worthy to note that the sharp fall in inflation in the first half of 2009 created significant base effects. This would, ceteris paribus, lead to volatility and some mild increases in annual inflation rates until mid2010 (Figure 35).
He is also Governor of the Banco de Espana, and a Member of the Governing Council of the European Central Bank. Governor Caruana has extensive experience in both the private and public sector in Spain, and is the author of several publications on the Spanish financial system. We are greatly honoured that he has accepted our invitation to speak on Basel II today. The Basel II project was already several years old when Governor Caruana took over its leadership, as Chairman of the Basel Committee, in May 2003. But he has put his own stamp on this project, and has made three special personal contributions. First, he has brought the formulation process to a successful conclusion with the publication last June of the definitive document on the revised framework. Producing this necessary road-map was no easy achievement given the differing views that had to be taken into account, and the considerable degree of scepticism in the industry. Secondly, he has, through persuasion and advocacy, managed to convert scepticism towards Basel II into a positive and constructive attitude. He has done this in particular by stressing that, when you look beneath the surface, Basel II is not so much about how capital adequacy ratios are calculated, as about how banks can improve their risk management and, thereby, how the efficiency of the banking system can be improved.

After more than 40 years in banking, many of them in Hong Kong, he is about to retire from the field. He is thus currently much in demand among his many friends within the financial community, who wish to fete him on his retirement. He is also receiving bookings in his new, risk-taking career as popular singer and entertainer – a field in which we wish him every success. I take this opportunity to pay tribute to David for his outstanding contributions to Hong Kong during difficult and challenging times, not just in the financial sphere, but also in the many community and charitable activities in which he is involved. Ladies and gentlemen, it is an honour to welcome Governor Jaime Caruana as speaker, and Mr David Eldon as discussant. I now have much pleasure in inviting Governor Caruana to deliver the seventh HKMA Distinguished Lecture. 2  BIS Review 9/2005
In this particular case, I think the open nature of the EU economy sets very serious limits on the proposal’s potential impact on the collection of tax, since the same scope for avoiding tax would continue to exist outside the EU as it does at present; and it seems unlikely that countries outside the EU area would voluntarily follow the same policy. So I think there is a very real danger that legitimate business would relocate, not just outside London, but outside the EU, thus further undermining any economic rationale for the proposal. This does not mean that work should not continue to see whether there are amendments to the scheme that could satisfy the interests of all the parties involved. But the Bank continues to believe that it is important to avoid any scheme that would damage EU financial markets. Turning to equities, I expect to see growing emphasis on analysis and investment according to European sectors, not countries. Thus you would expect to see investment banks’ research departments focusing more on pan-European sectors, rather than dividing their teams on national lines. In many firms this is happening already. More generally, I think we can expect to see greater “equification” in continental Europe. In the UK, the equity market’s capitalisation is around 165% of GDP. Among the “ins” it is generally much lower: in Germany and Spain it is perhaps 35%, in France 40% and in Italy 25%. Only the Netherlands really stands out, at around 130%.

A risk-sharing argument may call for the effects of monetary policy to be more evenly spread across households. On the other hand, monetary policy might have to adjust interest rates more dramatically in a world of widespread FRMs, which would affect some potential borrowers a great deal. Furthermore, FRMs require an extensive financial-sector risk transfer system 10, which may be costly, and may concentrate risks in systemically risky ways. Thus, there are clearly many tradeoffs that need to be carefully considered. Moreover, as academic research has emphasized, optimal mortgage choice depends on a borrower’s characteristics and financial circumstances. It therefore seems desirable that the mortgage finance system makes a range of different contracts available to borrowers, and be open to sensible innovations in contract design. 11 Although I have focused on ARMs, interest rate adjustability is only one of many important aspects of mortgage design that will be considered in the discussions today. Another important issue, for example, is how home price movements are shared between the borrower and lender. Home price risk is already partially borne by lenders and other mortgage investors, since a fall in home prices increases mortgage defaults and  6  See Agarwal, Driscoll and Laibson, 2013, “Optimal Mortgage Refinancing: A Closed-Form Solution”, Journal of Money, Credit and Banking, Vol. 45, No. 4, pp. 591–622.