samchain/econo-pairs-v1 huggingface dataset:
It had to include both monetary and economic analysis – the ECB’s famous two pillar strategy. By explicitly taking into account the development of  Page 2/4  money and credit in its monetary policy strategy, the ECB was unique in the world of central banking. However, the ECB’s monetary policy strategy was questioned by some academics. They favoured inflation targeting. Otmar never shied away from his critics and their arguments. Consequently, he launched the ECB and Its Watchers Conference. Academics, journalists and market participants were invited. There were lively debates about the role of money in the ECB’s strategy. In his last contribution to the ECB and Its Watchers Conference in 2006, Otmar reviewed the active discussion about the role of money in the ECB’s monetary policy strategy over the previous eight years. Otmar reminded the audience how some had argued that the role of money was too large. For others it was too small. Otmar pointed out that his typical response had been that it was ‘just right’. This reminds me of a scene in the film ‘Amadeus’. Mozart, Otmar’s favourite composer, asks the emperor whether he likes his new piece, the Abduction from the Seraglio. The emperor answers, hesitantly, that he does, but adds that occasionally the piece seems to have too many notes. ‘I don't understand’, Mozart replies. ‘There are just as many notes, Majesty, as are required.

I shall discuss each of these during the rest of my welcome address. However, first allow me to recount a few stages in a career full of accomplishments. Otmar Issing was born on 27 March 1936 in the university town of Würzburg. At the age of 18, he enrolled for classical philology, the study of classical languages, but soon switched to economics. He earned his PhD in 1961 and received his habilitation in 1965. From 1967 to 1990 he was a professor of economics. In 1990 he joined the Board of the Deutsche Bundesbank. And in 1998 he became a founding member of the Executive Board of the ECB and its first Chief Economist. Since 2006 he has been president of the Center for Financial Studies at the Goethe University in Frankfurt am Main. Architect of ECB strategy Ladies and gentlemen, let me now focus on the three attributes central to our decision to honour Otmar Issing with this lecture. I will begin with his role in the conception of the ECB’s monetary policy strategy, his most important and enduring contribution to Europe’s new monetary order. While Chief Economist of the Bundesbank, Otmar had written a paper claiming that a future European central bank should have a monetary target, essentially emulating what the Bundesbank had achieved. But when he arrived at the ECB, his thinking changed. He realised the risk of a monetary target in a totally new environment. Thus, a tailor-made strategy to achieve price stability was called for.
However, the increased volatility in equity markets has also been pronounced because of peculiar events: the integrity of financial analysts’ recommendations and the increased spread of fraudulent accounting practices. It is the latter that has struck the financial markets particularly hard in recent months. U.S. firms, such as Enron, WorldCom, Global Crossing and Xerox, have become household names not because of their services and products but for their alleged accounting abuses. Investors in these firms undertook investment decisions based on apparently false information. The fear is that only the top of the iceberg has been revealed and more unpleasant news is expected to fill the front pages of the daily newspapers. The fallout from the financial scandals has unearthed several dormant issues that twitch the nerves of financial markets. In turn, this has generated considerable discussion in the financial press, on the airwaves, and in the corridors of government buildings. While the issues are complex, the list of proposed solutions is long. This all suggests that consensus and reform will not be achieved overnight. Trust as an asset As in all walks of life, trust is a valuable attribute. Central banks, as well, value the importance of credibility and trust. Allow me a few minutes to explain why these qualities are important to the National Bank. At the same time, they can provide a good illustration as to why these same qualities are equally important for the private sector. Let me begin with what I mean by trust.

Trust is a term that is closely related to confidence and credibility. Trust is understood to mean when individuals share a mutual understanding that the rules of conduct governing their network work well and make things better for everyone. Trust can therefore be thought of as a kind of social capital - a shared asset that benefits everyone. Just as we speak about trust between individuals and public institutions, the same is true for publicly traded firms that interact with markets. With trust, economic systems and networks are more efficient for less effort is spent on monitoring and checking. With the establishment of trust, confidence is developed. Over time, as trust is built up, confidence and credibility are developed. Maintaining price stability is a key trust-building responsibility of the Swiss National Bank. Protracted changes in the price level, as a rule, stem from a malfunctioning of the monetary system. Price stability is important particularly because relative prices in our market economy govern the production and consumption of individual goods. Changes in the price level are liable to give misleading signals and lead to expensive mistakes in planning and investment. Inflation has other dire consequences. For the less fortunate - those unable to protect themselves against price increases - inflation means an erosion in purchasing power. This is especially true for fixed income investments. In contrast, for those that can protect themselves against inflation, it means  BIS Review 50/2002  1  that considerable resources are squandered in trying to hedge against inflation.
What we need is to integrate the legal and institutional systems in parallel with the EU banks. With the introduction of the Euro there would arise a number of technical issues which must be immediately tackled. As of today, Turkish banks are allowed to maintain foreign exchange positions in 23 foreign currencies, of which 17, including the ECU, are European currencies. With the Euro the CB and the Turkish banks will no longer have to deal in these currencies, but only in Euro. Of course, initially there will be some currencies, like the British pound and a few others, which will continue to exist for a while. But within this process, all foreign assets and liabilities in the currencies of the countries participating in the monetary union will need to be converted into the Euro. Currently, Turkey follows an exchange rate policy based on a basket consisting of the US dollar and the Deutsche Mark. It is assumed that since other European currencies are related to the Deutsche Mark through the European Exchange Rate Mechanism (ERM), the basket also reflects the weight of other European currencies through the Deutsche Mark. With monetary union the share of the Euro area in Turkey’s overall trade in goods or services will be more than 50%. But this will not change the picture from the exchange rate policy point of view. Therefore the Euro could easily be substitute for Deutsche Mark in the present basket.

Whilst Islamic finance has demonstrated resilience during the recent crisis, the IFSB has moved quickly to review its existing capital standards for possible enhancements and to incorporate new liquidity measures in its ongoing work in developing liquidity standards for Islamic banking. This work is currently being addressed through the Working Groups for Capital Adequacy Standards and for Liquidity Risk Management. The overarching objective is to ensure that the salient features of Islamic finance are effectively and adequately addressed while taking into account the issues that had surfaced in the crisis in the conventional financial system. The next stage is the implementation of these standards in the different jurisdictions, which is just as important as the development of the standards itself. This is an area in which global cooperation and collaborative action is critical so as to ensure the consistent implementation of the regulatory framework. The full adoption of IFSB standards will eliminate the opportunity for regulatory arbitrage, in particular, regulatory arbitrage due to cross-sectoral differences, cross-border differences and the differences between conventional and Islamic finance. The more consistent implementation of these standards will also ensure greater certainty in the regulatory treatment of Islamic financial transactions, thereby enabling comparability among institutions as well as surveillance by regulatory authorities. This harmonization will not only contribute towards global financial stability, but will also promote greater transparency across borders. The application and enforcement of the international prudential standards promulgated by the IFSB will contribute towards achieving these objectives.
And then I will talk about steps that we are taking to equip local talent with the essential skills required to cope with the evolving needs of the industry. The first set of issues on risk culture are more about the “mindset” of our talent pool. And the second set of issues are more about the “skillset” of our talent pool. Bank Culture 3. Let’s start with our efforts on bank culture, which is all about putting in place a framework for guiding the behaviour of risk takers. When it comes to behaviour, it is obvious that hard and rigid rules can only serve as the bottom line, whereas perception, incentive and culture are the real behavioural drivers. For nearly a decade since the Financial Stability Board commenced its work on the risk culture, the HKMA has been promoting efforts for cultivating sound risk culture and values in the banking industry. We always say that there is no single formulation of “sound” culture. But we do encourage banks to focus on three fundamental elements: First, a strong “tone from the top”, supported by sound governance; Secondly, an appropriate incentive system that drives desirable behaviour; and Thirdly, an effective feedback mechanism which provides an “echo from the bottom”. 4. In order to facilitate banks to translate these fundamental elements into effective practices, the HKMA has launched various initiatives over the years, including selfassessment on bank culture, and culture dialogues with individual banks.

Let’s now turn to the “skillset” part of the equation, in terms of efforts to equip our talent pool with the right set of skills to face the upcoming challenges. Recently, there have been media reports about talent shortage in Hong Kong. I’m sure you will appreciate that Hong Kong is a small open economy with a significant and vibrant financial industry. So it is really natural to see people come and go. Undoubtedly, the travel restrictions given the need to contain the spread of Covid would have brought a degree of inconvenience to travellers, in particular expatriates with families elsewhere. We at the HKMA have maintained a close dialogue with the industry and reflected the views of the industry to the Government. Despite the tough balancing act of pandemic controls and facilitating travelling, I’m pleased to see that our travel restrictions have in fact been adjusted gradually in the past few months. 16. Talking about the overall talent landscape, in fact many markets around the world are facing the very same issue of talent shortage. In recent years, the increasing prominence of Fintech and Green and Sustainable Finance have been a game changer to the global financial industry. Financial institutions across the globe are actively looking for experts with relevant knowledge and skillsets to help develop innovative Fintech solutions or sustainable investment products, manage the climate risks, so on and so forth. 17. Many markets resort to competing for talent globally by trying to secure talent from other jurisdictions to fill the gaps.
Although LIBOR and some other spreads are wider, they are, on average over time, generally stable and slow-moving, and as a result forecasters are able to incorporate any effect these spreads might have when formulating their projections for monetary policy. Changes in the policy rate continue to be passed through predictably into all these markets, as recently observed. Transitory, predictable and non-disruptive increases in period-end volatility are unlikely to meaningfully affect the real economy. And finally, there is evidence that the wider spreads among market rates that came out of money market fund reform are gradually closing over time, as firms adapt to the new structure of money markets by adjusting their portfolios and identifying new counterparties. However, if market dispersion were to increase too much, this could cause a variety of challenges. Such dispersion could affect monetary transmission, altering the price of credit made available to certain borrowers. This could complicate the formulation of monetary policy if it were to become harder for policymakers to anticipate the impact on the economy that would ensue from future changes to the federal funds rate. Such dispersion could also affect the use of our operations.37 As I have noted, it seems that much of the recent shift in money market dispersion has arisen as a byproduct of important regulatory improvements to improve the safety and soundness of the global financial system.

Simon M Potter: Money markets at a crossroads - policy implementation at a time of structural change Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, at the Anderson School of Management, Los Angeles, California, 5 April 2017. * * * Accompanying slides Thank you very much. I’m very pleased to be back at UCLA, where I enjoyed eight years in the 1990s as an assistant professor of economics. I’d like to thank my hosts for their gracious invitation to have, once again, the experience of speaking to a classroom of future leaders in finance, business, economics, and—just perhaps—central banking as well.1 Due to the large size of the Federal Reserve’s balance sheet, we are employing a new and innovative framework to control money market rates. Since late 2015, we have seen several significant developments in money markets that have tested this new framework. These include a profound reshaping of the money market fund industry as a result of new Securities and Exchange Commission (SEC) rules, significant shifts in cash management practices at the Treasury and large foreign reserve managers, and continued pressure on bank balance sheets due to the ongoing implementation of Basel III capital requirements. Also since that time, the Federal Open Market Committee (FOMC) has directed three 25 basis point increases in its target range for the federal funds rate.
The answer to this question clearly has an important bearing on the broader normative questions some have posed about the role of central banks. I begin by explaining why I think distributional issues are relevant to central bankers and to policymakers generally. This is not always agreed territory. I will then set out a framework for assessing the quantitative impact of monetary policy on different cohorts of society. This is done in both standard units of measurement (money amounts and percentages) and in non-standard units (welfare and well-being). This framework is calibrated using as a case study the loosening of UK monetary policy after the global financial crisis. The main results are easily summarised. There is nothing to suggest monetary policy has had significant effects on either income or wealth inequality in the UK over recent years. Indeed, the 4  QE calculated with reference to combined purchases by US, UK, euro-area and Japanese central banks between start-2007 and end-2017. 5 Bank of England and NMG survey (2017). 6 For example, Lysenko et al (2016) and Altmann (2009). 7 For example, Buiter (2014). 8 See Bank of England ‘Independence 20 Years On’ conference: https://www.bankofengland.co.uk/events/2017/september/20-yearson 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  loosening of monetary policy after the crisis appears to have delivered significant financial and welfare benefits to almost all cohorts of the UK economy, albeit often through different channels. I conclude with thoughts on the implications of this analysis for policymakers.

These efforts of the central banks and of the governments are aiming at permitting the banks to live up to their role in the economy by resuming lending to economic agents. Reasons for a medium-term economic recovery 2009 will be a very difficult year. I have already said this on various occasions. I see however at least four reasons why we can be confident that the world economy and the industrialised nations will recover: •  The vigorous reactions of central banks and governments to the extraordinary situation – not only in Europe, but worldwide – will progressively produce their effects. They may not yet have been sufficiently taken into account in the expectations of private sector participants. •  The growth potential of the emerging market economies, for example, in Asia, is considerable. Their current deceleration of growth is temporary. Many of these countries have an enormous potential to develop domestic demand. •  Technological progress is very rapid and will continue and even accelerate. It is a major source of future long term growth. •  Prices for oil and other commodities have fallen sharply since mid-2008. Their rise was an important factor in the current economic weakness. Their present low levels will be an expansionary contribution to the global economy  For these reasons it seems to be a reasonable working hypothesis that after an exceptionally difficult 2009 we will see an economic recovery in 2010.
The dimensions of the downturn According to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), the U.S. economy has experienced 10 recessions since 1950. The duration of those previous recessions averaged slightly less than a year during which real GDP fell an average of 1.75 percent and the unemployment rate increased an average of 2.3 percentage points. The Great Recession was far worse. From its peak, real GDP declined 3.8 percent – more than double the average decline of prior downturns (Chart 12). The unemployment rate began to increase in the second half of 2007. Over the next two years, it increased 5.5 percentage points. The rise would have been even more pronounced except that the average workweek and the labor force participation rate declined unusually sharply (Charts 13 and 14). Overall, total hours worked in the nonfarm business sector declined a staggering 10.6 percent (Chart 15). In addition to the decline in demand for labor, the manufacturing capacity utilization rate declined to 65.1 in June of 2009, the lowest level of the post-World War II period. The result is that the “output gap” – that is, the difference between actual output and the output achieved at the highest resource utilization rate consistent with price stability – has climbed sharply. This, in turn, has put downward pressure on trend inflation. For example, on a year-over-year basis, the core inflation rate declined to 1.5 percent in January 2010 from nearly 3 percent in the fall of 2006 (Chart 16).

“Global Imbalances: Is the World Economy Really at Risk?” Dexia SA. 2  Bartolini, Leonardo and Amartya Lahiri. 2006. Twin Deficits, Twenty Years Later, Federal Reserve Bank of New York Current Issues in Economics and Finance, 12, no. 7 (October). BIS Review 41/2010  3  estate assets induced entrepreneurs to produce more of those assets. In the housing market, this increase in prices was helped along by the relaxation of loan underwriting standards, which made it easier to obtain a mortgage and become a homeowner. Credit growth was the strongest among households with relatively low credit scores (Chart 5). The homeownership rate rose after being relatively stagnant for two decades (Chart 6). The increased availability of credit to lower income borrowers and the sharp rise in housing values contributed to the rise of consumption as a share of GDP and the decline of the personal saving rate 3 (Chart 7). Now, with the aid of hindsight, it is clear that we built too many houses, invested in too much commercial real estate and overvalued both significantly. The market overshot for several reasons. First, there was rampant speculative behavior. The longer these asset prices continued to rise, the stronger the belief became that they would keep rising in the future. Second, the rise in prices reinforced the initial relaxation of underwriting standards. During the period of rising prices, defaults and loan losses were very low. A homeowner who had difficulty servicing the debt could typically sell the home for a profit and pay off the loan.
As I will show, remunerating reserves lets us steer money market rates in an environment with a positive policy rate and a large stock of reserves. 8 However importantly, and in contrast to many other central banks that also pay interest on reserves, the SNB does not apply the same interest rate to all reserves. Instead, we employ reserve tiering. To illustrate how reserve tiering works, let us consider a highly stylised banking system, depicted on Slide 6. The SNB grants each bank that holds reserves a so-called ‘threshold’. This is marked on the slide by a red vertical bar. Each bank’s individual threshold is a function of its minimum  4 5 6 7 8  Berentsen et al. (2018) examine various approaches to implementing monetary policy based on the assumption of a large stock of reserves. Uncertainty about both the level and variability of the structural demand for reserves has also increased during this period. This uncertainty is partly due to new liquidity regulations that came into effect in the wake of the GFC. The stock of reserves could be reduced by selling some of the foreign currency acquired in previous years and by absorbing reserves via open market operations. In both cases, negative effects, such as a substantial appreciation of the Swiss franc, could not be ruled out. Libor, which had been the key reference rate for several decades, ceased to exist in many currencies at the end of 2021. SARON has fully replaced Swiss franc Libor.

This can be attributed to the fact that the economy still has substantial momentum to support growth. Exports and private investment, in particular, are expected to grow on the back of continued global recovery, a high level of capacity utilization, and conducive financial conditions supported by a turnaround in credit extension of the banking sector. Moreover, the economy is now in a much better position to weather external shocks, thanks to an improved external position and the strength of domestic demand. In addition, the Government’s much improved fiscal position should allow the economy to adjust to higher oil prices without interrupting the growth momentum. It is, therefore, our view that the risks to growth from the higher oil prices should be manageable. BIS Review 58/2004  1  On the other hand, the impact of the higher oil prices on economic stability is expected to be more pronounced. Latest data on headline inflation continue to show signs of price acceleration. In August, Thailand’s headline inflation therefore rose by 3.1 percent year-on-year, while core inflation rose by 0.7 percent year-on-year. With a narrowing of the output gap and reported tightening in some segments of the labour market, we believe that there is considerable pent-up price pressure building up in the system that could eventually translate into higher consumer prices. Our inflation forecast points to a higher probability of rising domestic inflation going forward.