samchain/econo-pairs-v1 huggingface dataset:
Jean-Claude Trichet: Interview in Il Sole 24 Ore Interview with Mr Jean-Claude Trichet, President of the European Central Bank, in Il Sole 24 Ore, conducted by Mr Beda Romano and published on 9 April 2010. *  *  *  Il Sole 24 Ore: Greece is in dire straits as it struggles with a huge public debt and a fall in competitiveness. Some market players and newspaper commentators see Italy as being the next in line to experience a financial crisis in the euro zone. Trichet: Of course, Italy is not at all in the same situation of Greece. Your country has shown resilience in this difficult period. In particular it was able to contain its yearly budget deficit and it has committed to get back to a sustainable situation according to the European rules. The ECB strongly encourages it to implement rigorously this programme. This said, the current crisis has demonstrated that all 16 countries of the euro zone must work hard, in a determined and efficient way, in order to make their economies more flexible and elevate their growth potential thanks to determined structural reforms. Improving labour productivity in particular is good for export growth and job creation. If this had been done more efficiently in the last years better results would have been attained in Italy as well as in the euro area as a whole.

Or should they stay their hand, in the expectation that what appears to be structural unemployment might actually be cyclical? This is the debate that I would like to enter into today, from the perspective of the euro area – that is, to ask whether we have indeed seen significant hysteresis effects, and whether this warrants changing how we think about our monetary policy decisions. My tentative answer today is that we have not yet seen hysteresis in its typical form – we have seen scratches, not scars. And though this more subtle type of hysteresis may warrant policy accommodation over a longer period, this is solely with the aim of achieving our price stability mandate, not preventing a rise in structural unemployment per se. Indeed, if those two aims were ever in conflict, our choice would be absolutely clear. Evidence of hysteresis in the euro area Let me start with a chart similar to the one Larry Summers showed for the US economy in his seminal 2014 speech.2 You can see that the level of potential output in the euro area today is much lower than what we had expected before the outbreak of the crisis, assuming it would have continued to grow at its 2007 growth rate. By this measure, the output gap has largely closed – not because the economy has been doing so well but because potential GDP has been revised significantly. These effects have been taken by many as evidence for hysteresis.3 But the discussion is arguably more complex than this.
This calls for urgent adoption of the Bank Recovery and Resolution Directive that will provide a harmonised toolkit across the EU. The SRM should have control of and access to a European resolution fund for resolution financing. This fund should be funded by ex ante risk-based levies on the industry. The European resolution fund should have access to a temporary emergency facility that is fiscally neutral in the medium term, meaning that any temporary public support will be recouped by ex post levies on the industry. BIS central bankers’ speeches  5  Restoring financial integration will unburden monetary policy From a monetary policy standpoint, the banking union will alter neither our policy objective nor our policy strategy. The pursuit of price stability as our prime objective is set out in the EU Treaty. We have delivered on our mandate. However, the banking union will change the environment in which we conduct our policy for the better. A banking union has the potential to unburden monetary policy in two important dimensions. First, the banking union has important implications for the ECB as liquidity provider to the banking system. Sound supervisory assessments and access to a powerful resolution framework is paramount for ensuring liquidity provisions to sound and solvent counterparties. In its role as supervisor, the ECB will have strong incentives to make sure its supervision is rigorous in order to protect our balance sheet and to ensure tight control over the risks we assume.

This growth projection and its composition are generally consistent with the baseline scenario of macroeconomic projections for Spain published by the Banco de España in mid-December and with those of most analysts (see left-hand panel of Chart 7). However, I would like to point out the two risks which I consider most significant for the macroeconomic scenario of the Budget. BANCO DE ESPAÑA  7	 TESTIMONY BY THE GOVERNOR OF THE BANCO DE ESPAÑA BEFORE PARLIAMENT IN RELATION TO THE DRAFT STATE AND SOCIAL SECURITY BUDGET FOR 2019  First, the macroeconomic projections of the Budget include an adjustment to the budget deficit clearly exceeding that expected by other analysts (see right-hand panel of Chart 7). In particular, the deficit target for general government as a whole stands at 1.3% of GDP in 2019, which is a reduction of 1.4 percentage points (pp) with respect to the envisaged final figure of 2.7% for 2018. By contrast, the projections of the Banco de España and of most analysts, as reflected by the Consensus Economics Forecasts, put the deficit for 2019 above 2%. Therefore, if the greater fiscal efforts required to meet the deficit target for general government as a whole included in the Draft Budget, amounting to 1.3% of GDP, were included in the projections of other analysts, their economic growth estimates for this year would be liable to a risk of downward revision.
It is our objective – although it is difficult to accomplish – that the community understands our work, which is to provide the public good of stability that allows the country to progress, and is not an operation carried out by technocrats with incomprehensible criteria. There is another important reason why central banks need to be transparent: the efficacy of monetary policy. In the past few years, advances have been made towards consensus that a more predictable monetary policy is better, without itself being a source of noise and instability. To that end, it is necessary to properly communicate our vision of the way the economy works and how monetary policy decisions affect inflation. Results During the 1990s there was a substantial increase in the number of autonomous central banks; many countries enacted legal reforms favoring central bank independence (table 1). The evidence shows that the increase in central bank independence has been associated with a reduction in inflation (Figure 1). This is valid for both developing and advanced economies, and confirms the findings of a large body of research that includes more rigorous statistical analysis to verify the robustness of the partial correlations. Also, higher degrees of independence have helped to reduce inflation volatility. Therefore, autonomy is the adequate strategy to correct the inflationary bias. In summary, the evidence indicates that higher degrees of independence are associated with lower, more stable inflation and, hence, with increased growth. In Chile, over the twenty years of central bank autonomy, inflation has averaged 7.5% per year.

(2007)  BIS Review 156/2009  5  Figure 2 Growth volatility in Chile, 1911-2010 (*)  (Standard deviation of the growth rate)  18% 15% 12%  15.0% 11.5% 12.0%  9%  7.5%  7.3% 5.1%  6%  2.9%  3% 0%  6.9% 3.6%  2.2%  1911- 1921- 1931- 1941- 1951- 1961- 1971- 1981- 1991- 20011920 1930 1940 1950 1960 1970 1980 1990 2000 2010  (*) 2009-2010 based on the IPoM of September 2009. Source: Central Bank of Chile. Figure 3 Percentage drop in the MPR between September 2008 and September 2009 and Central Bank independence  % drop in MPR (09.2008 09.2009)  1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0  0.2  0.4 0.6 0.8 CBC independent index (Arnone et al. , 2007)  1.0  Sources: Arnone et al. (2007) and Bloomberg. 6  BIS Review 156/2009  References Arnone, M., B.J. Laurens, J.F. Segalotto, and M. Sommer (2007), “Central Bank Autonomy: Lessons from Global Trends,” Working Paper 07/88, International Monetary Fund. Barro, R. (1995), “Inflation and Economic Growth,” Bank of England Quarterly Bulletin, 35, pp. 166–176. Céspedes, L.F. and C. Soto (2007), “Credibility and Inflation Targeting in Chile,” in F. Mishkin and K. Schmidt-Hebbel, eds., Monetary Policy under Inflation Targeting, Vol. XI, Central Banking, Analysis, and Economic Policy series, Central Bank of Chile. De Gregorio, J.
The financial supervisory authority in Sweden, Finansinspektionen, also promotes stability in the financial system, but with a greater focus on individual institutions – what we usually call microprudential supervision. As knowledge of the risks in individual financial institutions is extremely important for successful macroprudential policy, it is essential that Finansinspektionen also participates in macroprudential policy (see Figure 9). This is particularly important in a country like Sweden with four dominant major banks. Thus, the competence and experience of both the Riksbank and Finansinspektionen will need to be utilised if macroprudential policy is to be effective in Sweden. What other requirements can one reasonably make of a framework for macroprudential policy so that it will function efficiently? The framework for macroprudential policy in Sweden should entail a clear mandate and effective tools… The Riksbank has earlier highlighted a number of general criteria that should be met for macroprudential policy to function successfully, and which I certainly agree with. There are four main criteria.11 Firstly, it is necessary to have a good power for decision making, in the form of a clear mandate and well-defined tools. Secondly, a strong independence from political and sectorspecific considerations is needed, as I mentioned earlier. Independence assumes, thirdly, that there are forms for clearly holding the authorities accountable, for instance, through farreaching requirements for transparency and reporting. Fourthly, a substantial and lasting capacity for analysis is required.

A higher interest rate aimed at limiting financial imbalances therefore entails a balance, where short-term losses in the form of lower inflation and growth, must be weighed against long-term gains in the form of lower risks linked to a high level of household debt. As I am sure you are aware, I think that the recent monetary policy decisions entail a reasonable balance between these factors under the prevailing circumstances. However, this does not mean that there is no room for improvement in the future. A new policy area – macroprudential policy – could offer better honed tools than the interest rate for dealing with financial imbalances. Macroprudential policy is better suited to managing financial imbalances than monetary policy… The experiences of the global financial crisis have led to extensive international work on regulation, and to many countries now establishing new organisational structures and tools in what is known as macroprudential policy.5 Unlike the traditional financial supervision – microprudential supervision – which focuses on the risks in an individual institution, the  3  The real exchange rate is defined as the nominal exchange rate adjusted by prices in Sweden in relation to prices abroad. An alternative definition is that the real exchange rate compares prices in Sweden and abroad, measured in the same currency. 4  See, for instance, M. Apel and C.A. Claussen (2012), “Monetary policy, interest rates and risk taking”, Sveriges Riksbank Economic Review no. 2.
This less frequent auction schedule will limit the opportunity of banks to “be liquid” based on distributing their treasury bill investment in such a way that liquidity is generated by maturing these government papers. Increasing the investment base of investors. In cooperation with the Ministry of Finance and the Financial Supervisory Authority, it is agreed upon increasing the investors’ base, eligible to directly invest in the auctions of government papers. The new agreement signed between the Bank of Albania and the Ministry of Finance provides the necessary regulative framework for giving an end to the monopoly that the banking system has had in investment in the primary market of government papers, leaving space to natural and legal persons, foreign and domestic individuals. I do not feel well to assert that this step became indispensable, under the conditions of high commissions applied by commercial banks in providing this service, making the clients reluctant to this kind of investment. Earnestly believing in the efficiency and development driven by competition, I am convinced that increasing the number of operators licensed to trade government papers has also become a necessity. Primary rate for favorable clients. Being convinced that the monetary policy efficiency is enhanced through transparency, the Bank of Albania aims at including even this rate to the entirety of orientation rates used by commercial banks. This package is designed to increase incentives for you to find new profit opportunities and secure the necessary liquidity at a fair price in the secondary security markets.

The current development of the interbank market in Albania does not fulfil these assumptions yet and therefore, it makes the work of the Bank of Albania difficult in carrying out this essential function. Year 2002 recorded the start of the interbank market, the same year when the indirect instruments were introduced by the Bank of Albania to conduct its monetary operations. The Bank of Albania has attended the developments of the interbank money market in the last five years. During this period the trading volume has been fifteen folded, climbing from a daily average of 130 million lek in 2002 to a daily average of around 2 billion lek in 2007. Also there has been an increase in the maturity of the traded funds, from only trading overnight back in 2002 to trading up to three months in 2007. Also there has been an increase in the maturity of traded funds, from only trading overnight back in 2002 to trading up to three months in 2007. From the beginning of this year, we have been able to publish the fixed interest rate indexes, TRIBOR and TRIBID, which is hoped to promote the development of the interbank money market. However, we have to admit that this development has been a very slow one. During the last five years, the lek liabilities of the banking system have increased by 135 billion lek, which makes the increase in the trading volume of interbank market by a daily average of 1.9 billion lek, only a peanut in a big cake.
* * *  I. The euro has brought us all four main benefits Maastricht and the euro are naturally part of a broader history: the history of Europe, and its singular achievement of making the transition from war to peace. This history is just as topical in the highly uncertain world of 2017. Great Italians have counted among its key players, and not least Alcide de Gasperi or Altiero Spinelli. But I would also like to cite an almost unknown German, Josef Müller, founder of the Bavarian CSU, who was deported to a concentration camp during World War II; In 1946, he was one of the first to say: “We need a European currency, because countries that share a currency will never be at war”. In 1990–1992, the time had come: because German reunification required more European Union; and because the disintegration of the Soviet bloc brought the European continent back to the global arena. And so, from Rome in 1990 where we launched the intergovernmental conference – I remember the Palazzo Madama – to Maastricht in 1992, we created the euro. And others Italians have continued to be key players, from Tommaso Padoa-Schioppa to Mario Draghi today. Our foundations are therefore partly political; but the European edifice also has sound economic foundations. And I now wish to discuss its four tangible and concrete benefits. These are the three advantages of a sound currency: price stability; financing stability; and exchange rate stability. And, this results in the euro being an internationally recognised currency.

Moreover, from 12 at the start, the number of participating countries has risen to 19 today: 7 countries decided democratically to join the euro, and none has wanted to leave it. These are the concrete economic benefits that make the 340 million citizens of the euro area attached to their currency, to our currency. This attachment, which has been measured since the outset, has remained strong throughout the crisis. 70% support the euro today, i.e. the highest level since 2008; a large majority of French citizens support the euro (68%). Support remains strong in Italy, albeit at a lower level (53%). The euro is not a technocratic utopia: it is a political and democratic decision, supported 25 years on – with hindsight – by a clear majority of citizens. II. However, there are four doubts about the euro. I will address them seriously, even though I think that these ideas are erroneous. a) The euro is enemy of growth and employment Some say that the euro acts as a brake on growth, employment, and competitiveness. However, at 1.7% in 2016, growth in the euro area was higher than US growth (1.6%) and above all there are major economic successes among euro area countries.
As I said earlier, the rise in the oil price in the past year has, more than previously sharp oil price increases, been due to a pickup in the demand for oil owing to world economic expansion. A rise in the price of oil that is largely a result of high international growth is likely to have less negative consequences for the real economy than a more outright supply shock. In addition to this, of course, the economies in the West - and particularly the Swedish one - are far less dependent on oil than they were during the oil crises in the 1970s. This should mean that the impact of oil price rises on both the real economy and inflation would be considerably more limited than what proved to be the case at that time. The assessment of most analysts today seems also to be that the increase in the oil price in 2004 could indeed curtail somewhat the international economic upswing but that the recovery will not be derailed. The impact of the oil price on inflation, too, should be less than before. Since the oil price shocks in the 1970s there has been a shift in the economic policy regime in many countries which has meant that low, stable inflation has become one of the central targets of economic policy.

It is therefore also difficult to judge how productivity will develop in the period ahead. Our assessment has been that the robust productivity partly reflects longer-term changes but that it is also due to the economic situation, and is thereby partly of a more transitory nature. We examine this assessment regularly, of course. In order to judge how demand in the economy will affect future inflation it is important to have a good picture of resource utilisation. There is no exact measure of this, however. In the latest Inflation Report, the assessment was that total resource utilisation in the economy was still relatively low but that it would rise gradually and in 2006 reach levels at which it no longer would restrain price and wage increases. New data from the National Institute of Economic Research, for example, suggest that resource utilisation is still relatively low, even though all indicators are not completely in accord. The indicators based on labour market conditions point consistently to low resource utilisation. The somewhat stronger GDP growth that there is now reason to expect suggests, however, that the idle resources will be employed at a somewhat faster rate than forecast both in May and August. House prices and debt levels One issue that is of importance to the Riksbank for several reasons is household indebtedness and developments in residential property prices. The Riksbank is required to maintain price stability. In addition the Bank is required to promote an efficient, stable payment system.
In the domestic context, the LOLR ensures that neither the managers nor the equity holders of the institution receiving support are allowed to benefit. Internationally, it is not easy for the IMF to penalise those responsible for management of the economy, nor to distinguish between those citizens that have been responsible for excessive risk-taking and those who will be the innocent victims of the consequences of a financial crisis. It is the ordinary taxpayers in emerging market countries who will have to bear the burden of servicing loans from the IMF.5 4  Fischer, S (1999), “On the Need for an International Lender of Last Resort”, IMF. 5  A point stressed by Calomiris (“The IMF’s Imprudent Role as Lender of Last Resort”, Cato Journal, Vol. 17 No. 3 1998) although he underestimates, in my view, the possibility of liquidity runs as seen, for example, in Korea in 1997. BIS Review 95/1999  4  Absent a world government, it is difficult to see a credible ILOLR on the horizon. The reason is the simple maxim: “it’s the politics, stupid”. The second purist solution, at the opposite end of the spectrum, is the imposition of permanent capital controls. In other words, a return to the world in which the Bretton Woods institutions were created half a century ago. The advantage of capital controls is that they prevent the liquidity runs that result from currency and maturity mismatch of the financial sector. India did not experience a financial crisis, Korea did.

If we cannot find a way to reconcile free movement of capital with prevention of financial crises, then many countries may draw the lesson that they are better off with capital controls – either explicit or implicit – than without. Over the past decade, the two-year swing in the current account among G7 countries has been of the order of 1-2% of GDP. The largest swing was less than 4% (3.7% for Italy over the period 1992-94). These are small compared with the swing of 17% for Korea, in 1996-98. 1  Stiglitz, J E, Financial Times, 25 March 1998. 2  Sakakibara, E (1999), “Reform of the International Financial System”, speech to the Manila Framework Meeting in Melbourne on 26 March 1999. BIS Review 95/1999  2  Two dimensions of the reversal of capital flows have been evident in recent experience. First, their intensity and scale. Second, the rapid contagion from one emerging market to other previously unaffected countries. Both phenomena are a product of the nature of the capital flows concerned. The problems arise from short-term flows of debt finance, not long-term equity flows or direct investment. Equity investment has a self-stabilising mechanism. When an investor wishes to withdraw from the equity market he or she has to find a buyer before they can head for the exit. The market price adjusts in order to attract a buyer to replace the seller. The physical investments financed by equity flows remain in place, even if their value on the market has fallen.