samchain/econo-pairs-v1 huggingface dataset:
PROGRESSING SAFELY IN A RISKIER WORLD ADDRESS BY DR MARIO VELLA GOVERNOR, CENTRAL BANK OF MALTA DELIVERED DURING THE IFS MALTA ANNUAL DINNER  19 NOVEMBER 2019  Dear President and Members of the Committee of the Institute of Financial Services (IFS) Malta, personally and on behalf of the Board of the Central Bank of Malta, I thank you for this opportunity to address this distinguished audience and through them the financial services industry. Dear Minister, distinguished guests, dear colleagues and friends. Last year, I observed that the external environment was becoming less supportive of activity. Incoming data confirm this view. Global GDP growth has continued to weaken. According to the IMF’s October 2019 World Economic Outlook, global growth in 2019 is projected to be 3.0%, the lowest rate since 2009 and 0.5 percentage points less than its January 2019 projection. A number of factors are reflected in this state of affairs, a fluid state of affairs that is characterised by high volatility and uncertainty, a state of affairs that is anything but steady. Amongst these factors are simmering political tensions and flashpoints within and between states around the globe (some of which may eventually erupt as armed conflicts), uncertainty about future trade policies amongst which are (but certainly not the only ones and not the ones with the most far reaching negative consequences) those related to Brexit, and the impact of climate change and related policies including and especially policies that deny the man-made causes of climate change.

John C Williams: Research, policy, and the zero lower bound Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Shadow Open Market Committee Spring Meeting, New York City, 6 March 2020. * * * As prepared for delivery Good afternoon. I would like to start by thanking Athanasios for inviting me to participate in this event. It is a real honor to highlight the influence of our esteemed colleague Marvin Goodfriend, an outstanding and original researcher, policy advisor, and friend. Marvin epitomized the role of policy advisor. His research dug deep into the issues, introduced new ideas into the discussion, and developed options for policymakers to consider for the most challenging issues. The fact that we have so many researchers and policymakers here is testament to the importance of his research in shaping the conversations that we are having to this day. Before I reflect more on Marvin’s contributions to monetary policy, I should give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. In preparation for what I know will be a stimulating discussion, I’d like to highlight a few of the ways that Marvin changed the conversation in the U.S. about what was then commonly referred to as the zero lower bound on interest rates, or ZLB for short.
During 2001, growth was mainly in sectors with a relatively low growth in productivity, such as the private services sector and public authorities. At the same time, absence due to illness has increased considerably, which may also have contributed to a poor growth in productivity and rising costs for both companies and the public sector. BIS Review 25/2002  7  The rate of wage increase has risen, particularly within the services sectors, which appears to have contributed to pushing up the rate of price increase in the Swedish economy. This is an important reason why the Riksbank raised its repo rate by 0.25 percentage points, to 4.0 per cent, in connection with the publication of the Inflation Report just over one month ago. We also signalled on that occasion that if the trends regarding economic activity and inflation propensity in the Swedish economy remained the same, there may be cause for further increases in the interest rate. Growth in demand now appears to be on the right path both in Sweden and abroad. Swedish fiscal policy is currently conducted in a very expansionary direction, which made it natural for the Riksbank to wish to ease up on the accelerator to ensure the inflation target is achieved. Some people might think that this target means that the Riksbank is forced to give less priority to employment and production in a situation where a recovery is still in its infancy.

The SSM is the fruit of all these lessons… and, under your responsibility, the best guarantee for the future. Thank you for your attention. 3/3  BIS central bankers' speeches
During the Depression, the basic elements for the prevention of banking panics were put in place or strengthened: an extensive and well-designed system of federal deposit insurance, broad access by banks to the discount window, and sound supervision of banks.2 After 1933, the United States did not experience another major broad financial crisis for 74 years, until 2007. Even through significant macroeconomic upheavals, and the savings and loan crisis of the 1980s, the Continental Illinois failure in 1984, the Long-Term Capital Management crisis of 1998, and the dot-com crash in the early 2000s, a widespread financial crisis did not occur. Although the savings and loan crisis was very costly to taxpayers, for the  1  Franklin Delano Roosevelt, “Fireside Chat on Banking,” March 12, 1933. Transcript available from University of California, Santa Barbara, American Presidency Project, http://www.presidency.ucsb.edu/ws/?pid=14540. 2  Congress greatly broadened the lending powers of the Federal Reserve Banks in 1932 and again in 1933. The Federal Deposit Insurance Corporation was created in 1933. See Meltzer (2003) and Sastry (forthcoming). BIS central bankers’ speeches  1  most part the system of deposit insurance, discount window access, and supervision prevented runs and large spillovers into the real economy. The bank runs during the Great Depression have been the subject of extensive research. Economic theory provided increasingly compelling explanations for the mechanisms that lead to bank runs. The widely cited work by Douglas Diamond and Philip Dybvig in 1983 explained the economic logic behind why banks exist and what makes them vulnerable to runs.

Mojmír Hampl: The euro – the case of the European monetary integration project and its former hegemon Speech by Mr Mojmír Hampl, Vice Governor of the Czech National Bank, at the Mont Pelerin Society Annual Conference, Prague, 4 September 2012. *  *  *  Many thanks to the organizers for their kind invitation – I’m really honoured to speak on such a distinguished panel. But excuse me first for making a small detour: the organizers forgot to mention in my CV that I also had the honour – together with a group of distinguished colleagues (some of whom are here today) – to help launch Laissez Faire here 14 years ago. This is a magazine devoted to the promotion of liberal/libertarian ideas in the Czech public domain (“liberal” not in the American sense of this word). Such libertarianism is rather unusual intellectual equipment for a poor central banker, especially in the current times. However, I very much believe it is an advantage, and many of the ideas mentioned in Laissez Faire are very much missing from normal European policy debates. What a shame. But back to the topic: What is the euro? As Barry Eichengreen demonstrated, it is a really unique animal, a unique monetary arrangement. I do not buy into many of Barry Eichengreen’s ideas, but I do agree with this particular statement. Why? Here is my definition of the euro.
Innovation has enabled risk to be dispersed more widely, including outside the banking sector. And capital markets are deeper. Nevertheless, it is a potential concern that, looking forward, financial markets may not be pricing for – which means that investors may not be insuring themselves against – the range of uncertainties that preoccupy the official sector. Maybe the official sector is wrong. Or may be there is an underestimation of risks in the market, perhaps associated with the widely discussed Search for Yield, and possibly also with overconfidence in the capacity of monetary authorities or liquid capital markets to smooth out all shocks. This poses three questions. Whether the risks will crystallise. Whether, if they were to, any such crystallisation would be orderly or disorderly in financial markets. And whether if asset markets were disorderly, that would feed back into the financial system in ways that both seriously amplified the adjustment and created serious threats to systemic stability. I fear that the answers are unknowable. But the task for central banks is nevertheless clear enough. Working with our partners in regulatory organisations and in other central banks, we must seek to understand today’s global banking system and capital markets well enough to tell the difference, if and when called upon to do so, between a problem requiring solely a macroeconomic policy response and a more complex financial stability problem.

Surveys and anecdotal information point to firms operating close to capacity, but profit margins have been squeezed in recent years, essentially by the rise in energy prices. There is some slack in the labour market. That is deliberately broad brush; the point is that it is common to both stories. On the Orthodox Story, in conditions of robust aggregate demand, firms operating close to capacity are likely take opportunities to restore their margins by raising prices, pushing upwards on CPI inflation. So the Orthodox Story commanded a policy response to prospective inflationary pressures from excess demand. Under the Alternative Story, the outlook for inflation may be quite different due to developments in the labour market, notably from inward migration. There might well be more slack in the labour market than allowed for in the Orthodox Story. And, most potently, if more workers were to be attracted in to the country as aggregate demand expands, the economy’s productive capacity would expand as well. In that case, it would probably be harder for firms to raise prices, although they may still be able to restore margins by bearing down on costs, especially labour costs. (That is in aggregate; we would probably see further increases in skill shortages and in the premium for highly skilled labour in the professions.) On the Alternative Story, the outlook for inflation is highly uncertain – and not necessarily weaker, although that may seem the most obvious implication.
In practice, the evidence suggests progress towards improving the public’s understanding of the economy, finance and central banks has been slow and patchy, despite these initiatives. To start with the positives, there is concrete evidence of the improved central bank communications having improved the functioning of financial markets, the forecasting performance of economists and even the reporting of the media on the economy. 13  The transparency revolution improved understanding among those  whose day job it was to understand the economy and the role of central banks within it – the experts. The revolution appears to have had far less impact on understanding among the public – the non-experts. In 1999, the Bank of England began surveying the public to gauge their understanding of the economy and the 14  Bank. Back then, only around 7% identified the Bank’s Monetary Policy Committee (MPC) as responsible  for setting interest rates. 19 years and one transparency revolution later, the same survey earlier this year suggested around 6% of the general public had heard of the MPC. 15  The failure to boost understanding of the economy and central banks among the general public helps explain why trust in central banks proved more fragile than expected after the crisis. It is for these reasons I have spoken about central banks facing a “twin deficits” problem – a deficit of public understanding and a deficit of public trust. 16  These twin deficits are clearly complementary and mutually-reinforcing.

In the first nine months of the year, the fall in Gross Value Added has eased across virtually all the productive sectors, with the principal exception of energy. Leaving this sector aside, Gross Value Added is expected to have declined by 2.2%, thereby breaking the trend towards increasingly bigger contractions in this aggregate. This turnaround in Gross Value Added is closely related to the momentum of exports and reflects the fact that sales abroad, and, especially, those targeted on countries outside the European Union, have increased their relative weight in net turnover. On the figures to September, Net Profit rose to account for almost 12% of the sector’s Gross Value Added. In short, the Central Balance Sheet Data Office results published today corroborate the turnaround in the Spanish economy suggested by other macroeconomic indicators, although they also confirm that the momentum of expansion is still weak; accordingly, we must persevere with the reforms and policies that have enhanced our competitiveness, the main engine of the improvement witnessed these past months. I shall now very briefly comment on three important projects for our financial system. The first is part of the process of reform of securities clearance, settlement and registration in Spain. I refer to the introduction of a central counterparty (CCP) for stock market operations. The use of an entity of this type has been habitual in the derivatives markets and also, more recently, in bond markets.
Már Guðmundsson: Iceland’s crisis and recovery and current challenges Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at a conference, organised by the French-Icelandic Chamber of Commerce; Paris, 28 February 2013. *  *  *  President of Iceland, Ambassadors, Ladies and Gentlemen Nearly all of you probably know that almost 90% of Iceland’s banking sector failed in the first week of October 2008. This fact is well established in the minds of scholars of the international financial crisis. What is probably less well known is that at that point, Iceland was already on its way into a recession after an unsustainable boom and serious overheating during 2005–2007 and a currency crisis in the first half of 2008. The banking collapse and the associated wealth loss and further currency depreciation made the recession worse, of course, but so did the recession that hit the global economy in the fourth quarter of 2008. That autumn, two separate but interrelated sub-stories of the recent Icelandic saga converged in a tragic grand finale. These are: 1. Iceland’s boom-bust cycle and problems with macroeconomic management in small, open, and financially integrated economies. This is a story that has played out many times around the globe, and many of its elements have been seen before in Iceland. It might have been somewhat more extreme this time around, but it wasn’t fundamentally different. 2. The rise and fall of three cross-border banks operating on the basis of EU legislation (the European “passport”).

Inflation is predicted to fall back to the target around the middle of next year, although this will depend on exchange rate developments. 6  BIS central bankers’ speeches  The second relates to deleveraging, or reduction of debt levels. Public and private debt levels are on a declining path, as can be seen from Figure 8. In the case of businesses in particular, a significant part of this takes the form of debt restructuring and write-downs. That, along with the resolution process of the failed banks, will reduce Iceland’s net external debt to a sustainable level over time (see Figure 9). This is a good thing, of course, but the deleveraging process has two short- to medium-term side effects that must be managed. The first one relates the negative effect of deleveraging on domestic demand. The second relates to its negative effect on the exchange rate, as economic entities with foreign debt, little or no foreign-currency income, and no access to foreign credit are forced to repay foreign debt faster than is optimal for them and the economy. This is part of our balance of payments problem. BIS central bankers’ speeches  7  That brings me to the third challenge, which is to break out of Iceland’s balance of payments crisis and lift the capital controls. Through fiscal consolidation and reinforcement of its FX reserves (see Figure 10a), Iceland has seen a steep drop in the perceived risk of the sovereign as reflected in CDS spreads.
Indeed some companies have already begun to adapt their internal systems and processes so that they are able to make greater use of RMB, both in dealing with their Chinese counterparts and in their own financial management. This integration of RMB in their business decisions has in many instances served to strengthen their trade and investment links with China. 2  BIS central bankers’ speeches  16. For financial institutions, things are also in motion. It can be envisaged that the intermediation and servicing of capital flows into and out of China present fresh new opportunities, not least with the entry of a whole new grouping of investors into international capital markets. Also, with the institutional management of household savings being relatively low in China at present, an increase to levels more commonly observed in other economies would signify a great deal of opportunities for the asset management sector. 17. Hong Kong, being the gateway to China, has become the hub for cross-border asset management, and it has been a natural base for the managers of QDIIs, QFIIs and RQFIIs. As we look ahead, while the investments funds are coming through Hong Kong as a first step, it does not mean that the flows necessarily have to stop here. As a global financial centre and an important base for asset management, London makes a natural partner for Hong Kong when it comes to serving the growing needs of Chinese investors when they start investing into a wider array of markets and instruments.

In the other direction, with China being a dynamic and sizable economy, the world’s investors would be increasingly keen about participating in China’s capital markets, thereby gaining exposure to new investment opportunities. The experience of many other economies also suggests that capital-account liberalisation brings along with it a deepening of financial markets, making them even more attractive to investors. 10. In all of this, the role of the RMB will be crucial. Notwithstanding the current, only partial convertibility of the RMB, it is already the ninth most actively traded currency according to the latest Bank for International Settlements Triennial Survey. And the RMB has advanced to rank eleven as world payments currency according to SWIFT, a financial messaging service provider. Meanwhile the RMB is being added to the foreign exchange reserves of an increasing number of economies. 11. In terms of international transactions where RMB can already play a role, such as in trade settlement and foreign direct investment, transactions in RMB have climbed steadily. Today, some 13 percent of all of China’s trade transactions are settled in RMB and about 15 to 20 percent of foreign direct investment into China is conducted in the currency. Bearing in mind that the RMB trade-settlement pilot scheme was only introduced in 2009, this is an impressive achievement in such a short space of time. And there is plenty of room for further expansion of these numbers. 12.
First, it is not always easy to take the other side. There may be constraints on the ability to short the asset in question. Such limits on the ability to short sell can arise for many reasons. For some assets, short selling in size might simply not be possible because the markets are not sufficiently developed. Also, even if there were instruments that can be used to go short, it may not be an easy trade to undertake. For example, if a bubble builds up over many years and market participants’ compensation is based on year-to-year performance, there may be disincentives to take the short side. Compensation schemes and other practices that skew incentives may create a bias to simply “trade with the market.” Second, bubbles may simply emerge from the way market participants process information and trade. Experimental work done by behavioral economists has shown that people often trade in ways that generate price bubbles. In many carefully controlled experiments in which the intrinsic value of the asset could be determined with certainty, participants still bid prices up far above fundamental valuations, with the bubbles being followed by sharp declines in prices. BIS Review 43/2010  1  Let me give you an example of one of the seminal studies of this type. In this experiment, all investors start with an identical asset that pays the same dividend generated from a known probability distribution at the end of each trading period.

The policymaker could point out the assumptions embedded in the rapid rise in asset prices and question the accuracy of the assumptions. Obviously, the policymaker might be ridiculed by true believers about the lack of understanding about the important nature of the innovation. But I suspect that over time, a proactive central bank that laid out the risks clearly would gradually gain credibility with market participants. Use of the bully pulpit would allow the central bank to signal its concern. This might shift the risk/reward trade-off by raising the risks that the talk might foreshadow more forceful action. That, by itself, could temper behavior. Announcement effects can be very powerful, especially when they can be followed by changes in policy. The second set of tools includes those that are macroprudential in nature. I would define macroprudential tools as regulatory and supervisory actions that are not applied on a firmspecific basis. These include tools designed to temper demand or increase supply in the asset subject to the bubble or to increase the ability of skeptics to take the other side of the market in which the bubble may be occurring. For example, to counteract a housing bubble,  8  This argument has been made by many others. See, for example, Frederic Mishkin. How Should We Respond to Asset Bubbles? May 15, 2008. 9  An example of a sustained rise in asset prices that was not a bubble is the bull market in U.S. equities that began in the 1950s.