samchain/econo-pairs-v1 huggingface dataset:
Irma Rosenberg: Assessment of monetary policy Speech by Ms Irma Rosenberg, Deputy Governor of the Sveriges Riksbank, at Norges Bank’s conference on monetary policy 2006, Oslo, 30 March 2006. *  *  *  Let me begin by thanking you for the invitation to come here and speak to you! This type of conference, with participants from various inflation-targeting central banks, and where we can discuss common issues is very important in helping us to improve our knowledge. Introduction Many countries, including the UK, Norway and Sweden, today conduct monetary policy with an explicit inflation target. Moreover, in many countries the central bank has been given an independent position and responsibility for maintaining price stability. Experiences indicate clearly that it is difficult to maintain low, stable inflation unless the central bank can act with a large measure of independence. Maintaining confidence in monetary policy and in the inflation target requires that the central bank can be free from any suspicion that it might give way to pressure from the political system or from various pressure groups to conduct monetary policy aimed at other targets that are not compatible with price stability. Maintaining confidence also requires an understanding in society as a whole and broad political support for monetary policy. The central bank’s independent position therefore entails a requirement for openness and clarity with regard to the bank's method of working with monetary policy. Independence also means that it is important to be able to assess monetary policy.

They do not usually base their forecasts on an unchanged interest rate. The new assumption makes it easier to assess the forecasts, as the conditions are normally more realistic. The fact that we have chosen to make this change can be partly regarded as a result of academic research, and also partly because this assumption appears to have worked well for other central banks that have chosen to base their forecasts on assumptions other than a constant key rate, such as Norges Bank and the Bank of England. Basis for assessment So much for our monetary policy strategy, which is what I believe we should be assessed against. Let me now say a few words about the basis we supply for assessment. The analysis work on which the monetary policy decisions are based is published in the form of Inflation Reports. These contain analyses of the determinants of inflation and forecasts for inflation developments over the coming years. They also contain analyses of why deviations from target have arisen or are expected to arise, given a particular monetary policy stance. The Inflation Reports thus contribute to spreading knowledge about the Riksbank’s assessments and thereby make it easier for external parties to follow and understand monetary policy. Moreover, we want them to encourage discussion of monetary policy issues. So far we have published four Inflation Reports a year, but we have now decided to reduce the number to three.
And the second is the improved communication between policymakers and market participants, which has allowed the bond market to form its own expectations about policy direction and to respond accordingly. These two qualities, in my view, are positive for the development of the bond market in the longer-term. Outlook and developments in the bond market This year the Thai economy will continue to expand, driven by momentums in domestic demand and export, including the launching of new infrastructural projects. Higher investment will imply higher funding requirement. Given ample liquidity in the system, funding investment expansion domestically should be a preferred option to funding it from abroad. Domestic funding will help make the domestic credit market competitive while helping to avoid the unnecessary pick-up in external debt. It is in this context of domestic resource mobilization that the bond market can have an important role to play. BIS Review 29/2005  1  This is to say that while bank credit will continue to be a major intermediary for investment finance, the need for long-term investment financing will offer considerable opportunity for the bond market. On the supply side, the fixed income market can be an important channel for long-term capital mobilization, while on the demand side, there will be ample demand to invest in fixed income instruments from domestic institutional investors. It is in this context that the current efforts to develop the domestic bond market by the Government are timely, and this priority now ranks high on the Government's agenda.

Bandid Nijathaworn: Developing the bond market - a central bank perspective Remarks by Mr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Asset Forum, Bangkok, 29 March 2005. *  *  *  Distinguished Guests Ladies and Gentlemen Let me first thank the Asset magazine for inviting me to give this luncheon address. It is a pleasure to be here. I also would like to congratulate the organizer for putting up today's event. The bond market in Thailand is now at an important stage of development and a function like this is certainly a positive contribution. For my brief remark today, I want to make a few points on the Thai bond market from the standpoint of the Bank of Thailand. I also want to share with you our plan for developing the bond market this year. From the Bank of Thailand's point of view, the bond market is of exceptional importance to us. This is because it is the market that we operate monetary policy through open market operations and through our operations in the repo market. Therefore, the more developed and efficient the bond market, the more effective the conduct of monetary policy would also be. Also, a vibrant domestic bond market is essential for a robust and efficient financial system. This is important for the development of the economy in the longer-term.
Whether this consensus is a result of the role played by Spanish economists, as Enrique Fuentes set out to demonstrate in his major work published by the Real Academia de Ciencias Morales y Políticas, will be something for historians to decide. I would, however, venture to say that in the economic debate in Spain heterodox positions, or those furthest removed from the central strand of current economic thought, are relatively marginal. Concerning qualitative aspects, I have no doubt that another of the factors behind Spain's dynamism is the improved management of Spanish firms. And behind this lies a process in whose beginnings Barcelona was a driving force. I refer here to the expansion and quality of our business schools, which enjoy great prestige internationally. In the business school rankings of recent years, three Spanish institutions have systematically been in the top 30 worldwide. I would not wish to conclude this review of the factors contributing to the momentum of the Spanish economy in the past 20 years without referring to the important role decentralisation has played. Decentralisation is not free from risks - and I shall in fact deal with some that are most relevant to us but it has acted in Spain as a powerful economic, social and cultural dynamo, in a similar way to what happened in post-war Germany with the creation of the Länders. ***** Let us look now to the future.

The volatility of key variables for economic agents such as the interest rate, inflation or the exchange rate has diminished. But growth has continued to be unbalanced in those aspects I have already mentioned, such as household and corporate debt, and continuing price and cost differentials. At issue here are imbalances posing risks to growth sustainability within an area with very high stability requirements by Spanish standards. Yet while such risks are very important for the Spanish economy, the biggest risk of all is complacency. It is vital to maintain the attitude of non-complacency which has driven economic agents, governments and other players who have sustained the Spanish dynamism of recent decades. A change in attitude which were to convert the satisfaction with the current situation into an excuse to detain the drive to innovate and reform would, sooner or later, bring the ongoing process to a halt. We must continue striving to discover how we can improve the performance of our institutions and companies. This is the main idea I wish to share with you today: let us not fall into complacency. However much we have progressed, let us not stop. There are examples of developed countries which, having achieved very favourable income and wealth levels, lost their reforming dynamism and, as a result, entered lasting situations of slackness and sluggishness with serious employment problems and a deterioration in confidence at all levels. It is therefore important to identify the specific policies we should foster in the future.
Bank supervision added value by assuring counterparties and market participants that banking entities had clean and accurate balance sheets by forcing the timely recognition of losses. More recently, in response to the development of rating systems, the supervisory effort has shifted to the evaluation of the credit risk management process, and specifically the quality of each bank’s internal credit rating system. As supervisors we are no longer solely concerned with whether a bank has properly rated a troubled credit. Rather, we are now focused on the extent to which the bank can properly distinguish between loans across the spectrum of credit quality through its ratings, and whether these ratings are adjusted on a timely basis according to changes in a borrower’s performance. With Basel II, there are requirements for a meaningful differentiation of risk, for credit ratings with integrity, and for a warehouse of data to support the ratings (and requirements to ensure that historical data horizons cover appropriate economic downturn conditions). Moreover, banks will be required to test their rating system’s performance, resulting in more accurate ratings and capital assessments. In addition, through Pillar II, banks will be required to benchmark the results of their Pillar I credit assessments through rigorous stress testing.

The original Basel Capital Accord was itself a landmark event, revolutionary in providing a common capital assessment approach, now used by over 100 countries. However, it has obvious limitations that have become more significant over time. It has become less and less reflective of the risks of our largest organizations, and, accordingly, has become less and less integral to our ongoing supervision of them. Basel I, as we all know, includes such shortcomings as: a) its failure to recognize differing credit quality within the same general asset type; b) its varying the capital charge with the credit exposure’s legal form, such as whether it is on or off balance sheet; and c) its simplistic approach to risk transference and credit risk mitigation. More generally, Basel I was not structured to keep pace with the rapid rate of financial innovation that we have seen in internationally active banks. It clearly has created incentives for capital arbitrage, with banks able to structure transactions with the primary goal of minimizing regulatory requirements without a commensurate reduction in risk. Similarly, it has resulted in distortions in bank activity, by creating a tax on certain activities while understating the risk for others. BIS Review 35/2005  1  These have combined to make the regulatory capital metric less informative to investors, supervisors and counterparties, and have eroded the principle of adequate risk-based capitalization that the Basel Accord was designed to promote.
The best that macro policy could aim for was stable and low inflation which would provide a platform for sustainable growth at a rate which would be determined in large part  BIS Review 21/2009  1  by the microeconomic policies which could affect the productivity and dynamism of the economy. The right instrument to maintain that low inflation environment was monetary policy. And to ensure that interest rates were used to that end, and thus to condition public and market expectations, the decisions should be taken by an independent Central Bank pursuing an explicit inflation target and informed by modern macroeconomics. Fiscal policy In macro terms, fiscal policy was put on auto pilot. Discretionary changes in the government’s tax and spending plans were thought to require too much time to agree and take their effect to be of any practical use in stabilising the economy. And economists worried that fiscal measures would prove largely impotent in any case – households and companies would “look through” any cut in taxes today, which they expected to be financed by an increase in taxes tomorrow. So monetary and fiscal policy worked in tandem. Monetary policymakers relied on the government to balance the books over the cycle so that the inflation target would remain credible. And the government relied on monetary policymakers to stabilise the economy, so that fiscal policy could focus on other aims: encouraging innovation, growth and employment; redistributing income and investing in the public services.

Foreign direct investment in the banking and the financial sector should also be encouraged as it allows the transfer of technology and management skills. But it should be clear that such an opening up of the capital account should, in times of financial stress, not lead to fire-sale prices. Measures aiming at protecting the financial system liquidity from the adverse consequences of sudden changes in market sentiment (the so-called “liquidity-at-risk policy”) should be given further consideration. The Argentine authorities have adopted such a policy by introducing a liquidity requirement on banks’ short-term liabilities (foreign as well as domestic liabilities). This system has been supplemented by a Contingent Liquidity Facility with a number of international banks. More generally, policies designed to discourage excessive short-term foreign borrowing and based. on market mechanisms should be supported. For instance, unremunerated reserve requirements on short-term foreign liabilities are an incentive to lengthen debt maturity; domestic savings should be more systematically mobilised through a development of domestic financial markets (promotion of larger and deeper financial markets). In particular, making short-term foreign liabilities more costly would also promote borrowing in local currency, making the financial system less vulnerable to external shocks. BIS Review 81/1999  2  International financial markets and international governance issues As to the promotion of efficient functioning of global markets, I would like to insist on three points: í  Firstly the specific dangers associated with the “herd instinct” of market participants.
This is understandable because, under the prolonged period of quantitative easing by the major central banks in the advanced economies, bank deposits and bonds offer rather low and unattractive interest income. As for the stock market, the volatility in share prices will expose the retirees to significant market risks. As a result, there can be a fairly large group of retirees who find them not having enough cash flows to support a decent retirement life, despite the fact that the properties they own and occupy are worth quite a lot. 1/4  BIS central bankers' speeches  At the same time, their cash savings are basically left idle, yielding very little, if any, cash flow income. Many old folks would feel apprehensive to dip into the principals of their bank savings to meet daily expenses, as this would expose them to the uncertain but rather scary longevity risk. This situation is not unique in Hong Kong as there are many places that have similar problems. So it may be useful if I share with you the Hong Kong experiment in helping this group of retirees through some market based and financially sustainable solutions. HKMC and Market-based Financial Solutions for Retirees 4. These market based retirement protection solutions are developed and operated by the Hong Kong Mortgage Corporation (HKMC), which was set up in 1997 and is fully owned by the Government through the Exchange Fund managed by the Hong Kong Monetary Authority (HKMA).

When the couple reaches the age of 70, they are entitled to a non-means tested Old Age Allowance of $ $ x 2) provided by the Government. So this couple will be receiving up to $ (or $ per month or around $ (or $ per year, and have the benefit of being able to stay in their own property, for life. Compared with the median income of two-person households in Hong Kong of $ (or $ per month,1 this guaranteed monthly payout of $ would really help support a decent retirement life and protect the retirees from highly volatile market risks and from increasingly high longevity risk. Conclusion 9. I would like to conclude by making the following observations: The Reverse Mortgage Programme and the Life Annuity Scheme, when combined, will create an economic outcome similar to a life pension. This self-made pension is (a) a market based solution to provide steady cash flows for life by liquefying the fixed and financial assets accumulated by the retirees during their working life. The schemes are commercially and financially viable and will therefore not involve Government subsidies; 3/4  BIS central bankers' speeches  The launch of the Life Annuity Scheme has helped promote the annuity market in Hong Kong, which has up till now been rather underdeveloped. In 2016, the annuity business only accounted for less than 2% of all long-term insurance business of (b) private insurers in Hong Kong.
By contrast, in the euro area it is only about four times. And if one assesses the emerging markets of Asia against the Maastricht criteria, one can conclude rather conveniently that Asian monetary co-operation, implying Asian Monetary union, is a non-starter. This is even more so considering the virtual absence of labour mobility and the existence of large patches of different degrees of restrictions in capital mobility. But the important thing to realise is that the degree of trade integration, and therefore the degree of interdependence among Asian economies, is very high. About half of total trade in Asia is intra-regional. This is more or less the same as the proportion of Europe’s intra-regional trade to total trade when the Treaty of Rome was signed. And intra-regional trade within Asia has been growing rapidly - a trend that is likely to continue in the foreseeable future. There is considerable vertical integration of the production process in Asia, driven by foreign direct investment flows within Asia and outsourcing of the process to the area possessing the comparative advantage. China is increasingly serving as the manufacturing powerhouse of Asian exports, while other Asian economies supply the raw materials, semi-manufactured goods and machinery. Admittedly, the larger part of intra-regional trade in Asia, 56% according to our internal estimates2, is related to processing trade, some of which is to meet demand from the developed economies in North America and Europe.

Or into whether monetary policy could be used to control asset prices as well as doing its orthodox job of steering nominal trends in the economy, which I should say can include taking account of prospective risks of inflation volatility over the medium term. Ideas circulating already include minimum margin requirements or capital ratios that vary not only across instruments or firms but also through time as credit conditions change. We need calmly to explore whether there are also other possibilities. But let me make this absolutely clear: there are formidable obstacles to finding a solution. In the monetary sphere, a regime of floating exchange rates allows individual countries to  6  BIS Review 134/2009  instruments, whether the instruments would be operated under a rule or discretionary judgments, and whether it was feasible for one country to attempt to employ such instruments in a world of freely flowing capital. I will sketch our preliminary views on those questions. The Bank will publish a Discussion Paper, going deeper than I can today, over the next few weeks. We do not have all the answers and I must stress that we are not in advocacy mode, but we have reached the point where we should like to try to inject some further thoughts into the debate.
Of course, as a central banker, I am fully aware that identifying asset bubbles is not an easy task and it may also be challenging to convince the public and politicians about the necessity of raising policy rates at a time when economy is booming but the prices of goods and services are stable. However, the recent crisis has demonstrated that central banks may ignore imbalances in financial markets at their own peril. Today, we have a unique opportunity to discuss the future of the global financial system and the role and responsibilities of the emerging economies. I believe that the timing and the framework of this conference will provide ample opportunity for sharing new ideas and highlight some critical lessons to reshape a better global financial system for a more resilient and stable global economy. Once again I extend my warm welcome to all participants. I also want to thank the distinguished participants for their valuable contributions. I hope you enjoy both the conference and your stay in Istanbul. 2  BIS Review 120/2009

If all stakeholders do their part well, not only will we have fair and efficient capital markets that everyone has confidence in, but we will also make Singapore a competitive and vibrant financial hub in Asia. Thank you for your attention. BIS central bankers’ speeches  9