samchain/econo-pairs-v1 huggingface dataset:
Mr Yam’s statement on the listing of Exchange Fund Notes on the Hong Kong Stock Exchange Speech by the Chief Executive of the Hong Kong Monetary Authority, Mr Joseph Yam, JP, at the listing of Exchange Fund Notes on the Hong Kong Stock Exchange on 19 July 1999. Mr Lee, Mr Chan, Distinguished Guests, Ladies and Gentlemen, Today’s signing ceremony paves the way for the listing of Exchange Fund Notes on the Hong Kong Stock Exchange next month. In addition to offering retail investors an attractive and reliable investment opportunity, this listing will mark an important milestone in the development of Hong Kong’s debt market. Hong Kong, and indeed Asia as a whole, lacks an active debt market. What should in theory serve as an important pipeline of financial intermediation, through which the savings of the community flow into productive investment, has, in this region, always been constricted. At times, it has been quite clogged up. By the standards of developed market economies, our reliance on the banking and equity markets, the two other channels of financial intermediation, has been, and still is, disproportionately heavy. As a result, we cannot really say that financial intermediation in Hong Kong is entirely efficient. One consequence is that, in the event of a failure in one of those channels of systemic proportions, the pressure built up in the other channels could become unbearably great, and even explosive.

The second block relates to synchronising the BNB supervisory practices with those of the ECB. This includes an enormous amount of activities, among which supervisory regulations, statistics, and IT systems. The BNB’s efforts in this area are a logical development of the banking sector reforms launched in 2015. The third work block is linked to organising and conducting the asset quality review and the stress test, which is a widely discussed topic. The preparatory phase in this respect has been completed. The banks that will be covered by the review and stress test have been designated, as well as the auditors, methodologies and macroeconomic scenarios used for the stress test purposes. The results are expected to be announced in July, Mr. Radev said. Work on the Single Resolution Mechanism has been organised in very much the same way. An essential element in the first work block in this area – amendments to the legal framework – is the preparation of a Draft Law amending and supplementing the Law on the Recovery and Resolution of Credit Institutions and Investment Firms. The part involving the BNB was finalised at the end of last year and is due for submission to the National Assembly with legal amendments likely to get adopted by the end of this quarter.
The part that has been much in focus has been the monetary policy regime – in Sweden and the UK, inflation targeting with a specific target for inflation and regular and transparent inflation forecasts has worked well. But inflation targets, or for that matter Denmark’s euro peg, would never have been as successful had fiscal policy not been reformed in parallel, with clear rules and budgetary ceilings in Sweden and Denmark which put the problems squarely in the sight of the public. Considering the UK fiscal deterioration the last couple of years, one might draw the conclusion that the so called golden rule, i.e. only borrowing for public investment, is not a clear enough rule, but that expenditure ceilings and targets for the fiscal balance are more effective. In fact those euro area countries that have some sort of national transparent targets and evaluation of fiscal policy have managed to retain some order in their public finances; Finland being a prominent example. The power of targets and transparency is that the public, with the help of comments from analysts in the media, can evaluate clearly how the government is doing in relation to a long-term norm. Is fiscal policy in line with the target, or is it deviating from target? The idea of being on or off target is quite easy to grasp, and if the process is transparent, experts and the public alike will learn to trust the figures. In this area most countries still have a lot to do.

Countries with larger fiscal deficits have had a more procyclical policy both in good times and in bad times. A Commission paper finds a significant impact of elections on procyclicality, especially procyclical tax cuts. In addition, the structural deficits are most likely higher than presumed. With lower potential growth, the ECB will need to push the brakes earlier and more forcefully than most people assume. Hence, the long awaited help from growth to fix the deficit problems and the debt-to-GDP ratios will most likely not materialize. Deficits and debts could  4  BIS Review 88/2006  deteriorate even further when pressures from an ageing population will kick in within the next five years. Is there a solution? Let me first note an interesting development: 1999-2004 the average yearly fiscal deficit in the euro area has been 1.9 per cent of GDP while the average yearly (unweighted) surplus of the three old outcountries (the UK, Denmark and Sweden) has been 1.1 per cent of GDP. This despite the fact that the UK has moved from a comfortable surplus position to a deficit of 3.3% of GDP in 2004. Some euro-sceptics will of course attribute this difference to monetary union itself but I think the difference is rather that all three out-countries have been forced to find new ways of building a strong national macroeconomic framework based on clearly stated goals and a transparent evaluation of how these goals are to be met, in addition to the common EU rules.
By contrast, the role of non-banks such as investment funds, pension funds and insurance companies may increase since they are in a better position to offer the products that are in higher demand. As a matter of fact, in recent years non-banks have been increasing their share in the financial system as a result of different factors and not only due to demographic changes. In any case, the financial sector will need to adapt to these changes, offering new products that cater for the needs of the population. It is worth mentioning that these developments are taking place against a background of low profitability in the banking sectors in many jurisdictions including the euro area, Japan, the United Kingdom and Switzerland. In many cases, the ROE of the banking sector is not only well below levels seen before the crisis but it is also lower than banks’ cost of equity. 14  Ageing can also have consequences for the stability of financial systems. A permanent lower level of risk-free interest rates might foster a search for yield by financial intermediaries. On the one hand, this process would leave financial intermediaries and the final investors more exposed to shocks. On the other hand, the valuation of some assets might become too stretched, increasing the risk of sharp adjustments in the future. Against a background of ultra-low interest rates, in recent years some financial intermediaries, such as investment funds, have increased the average maturity of their bond portfolios and their exposure to exchange rate risks.

03.03.2020  Challenges of population ageing from a central bank perspective Public Lecture at the International Center for Monetary and Banking Studies (ICMB), Geneva Pablo Hernández de Cos Governor  Good afternoon. Let me start by thanking Professor Ugo Panizza for his invitation to participate in this public lecture organised by the International Center for Monetary and Banking Studies. I cannot think of a better place to share some thoughts on population ageing and the challenges it poses, in particular from a central bank standpoint. In my talk I will first describe the process of demographic transformation the world is undergoing. Next, I will shed some light on the challenges that population ageing poses to macroeconomic developments and policies. Finally, I will focus on the implications of an ageing society for the financial system. The demographic transformation  In recent decades, countries around the globe have been experiencing population ageing, a phenomenon poised to transform the societies and the economies in which we live. Currently, according to the United Nations World Population Prospects, 1 in 11 people in the world is over 65, up from 1 in 20 people back in 1950. Indeed, thirty years hence, projections point to the percentage of people over 65 reaching 16% of the population, in other words 1 in 6 people. The figures are quite telling. Actually, the world demographic structure no longer resembles a population pyramid. Rather, it is turning into a slender tower.
That means that the 18% appreciation of sterling which began in early 2013 (as the prospects for the UK economy improved relative to those of our trading partners) is currently exerting significant downward pressure on inflation and is likely to continue to exert some downward pressure for several years to come as lower import costs pass through the supply chain. But not all of the weakness in inflation can be explained by the price of things we import – a portion 3 of the current deviation from target is due to weakness in domestically generated inflation. The biggest domestic driver of inflation is labour costs per unit of output, and in order to generate inflation at target in the medium term, wages would ordinarily need to grow about 2 to 3 percentage points more quickly than productivity growth. The data are noisy, but over the period since the recovery began, that wedge – known as the unit wage cost – has averaged just 1% (Chart 3). Of course for much of that period the weakness of wages relative to productivity was consistent with the presence of slack in the labour market. But something of a puzzle started to emerge in 2014 when – despite a significant narrowing of that slack – wage growth  1  As time passes the effect of the early tranches of asset purchases on the level of output diminishes. The peak impact on GDP of asset purchases probably occurred during 2013.

The prices of other goods and services, on the other hand, have been posting quite modest growth rates. Therefore, the inflation expectations of entrepreneurs and consumers have remained close to the historical average. If the price hike of commodities stops, the increase in the euro area’s prices could remain below 2% already next year. However, looking at the data from another angle, we can find proof to arguments which insist that the current euro-area interest rate level is not suitable for guaranteeing the low inflation rate that corresponds to the price stability goal. Although the general public focuses on the debt crisis of certain European countries, the developments of the economy itself have, on the whole, exceeded expectations. Economic growth has remained above average and the utilisation of production capacity no longer resembles a crisis situation. Though unemployment is still high, it is decreasing and the indicators of the industrial and service sectors are posting quite high results from the historical perspective. If we add here the fact that global price rise pressures have been annoyingly enduring and do not show any signs of abatement, the risk of a persistently higher inflation rate in the euro area has increased. Therefore, at the press conference after the most recent meeting of the Governing Council of the European Central Bank it was pointed out that, to withstand this threat, the Eurosystem might increase the price of money in the markets earlier than expected, maybe already in April.
In a world where a German trader can trade on an exchange in London with a counterparty in the US who uses a French technology provider and a Belgian settlement agent, the question of how to ensure that all parts of the process are regulated effectively is a tough one. Some argue there should be some kind of pan-national “super-regulator”. Perhaps that is where we will eventually get to although one worries about its potential for the worst sort of bureaucracy: and in the meantime we think that an approach based on close cooperation and the exchange of regulatory information, is a pragmatic way forward and more likely to balance the need to protect investors and the need to encourage innovative, responsive markets. But let me turn my attention back to the opportunities that technology offers. The scope for new contracts on B2B and e-commerce networks is enormous. Contracts that would have taken some time to establish themselves in a pit can be quickly listed on screen at relatively little cost. Trading is now possible in such diverse commodities as electricity, telecoms bandwidth and even the weather. The organisers of this event may, in future, be able to hedge their exposure to fluctuating wine prices using exchange-traded futures based on the finest premier cru, I suspect this is one contract where traders would be happy to go to physical delivery. We central bankers will have to stick to our usual vin ordinaire.

With regard to the length of the period of ERM II membership, in view of the varying degrees of convergence of the accession countries, limiting the duration of ERM II membership to the minimum permissible time to qualify for the adoption of the euro – that is, two years – may not be an optimal choice for all accession countries. Longer membership of ERM II may, in some cases, be helpful since it would allow accession countries to retain the exchange rate as an instrumental policy variable during the catching-up process. Indeed, this option has proven useful for most of the current euro area participants. Again, it is worthwhile to recall the examples of Greece, Portugal and Spain. In the case of Greece, the final revaluation of the drachma on 17 January 2000 took place at the request of Greece, with the agreement of the EU authorities, to support the country's efforts to preserve sustainable price stability and progress in real convergence without jeopardising the competitiveness of the economy. Portugal and Spain, which participated in the EMS/ERM for a longer period of time, also used the option of realigning the respective exchange rates of the escudo and the peseta at several points along the road towards entry into the euro area. Participation in ERM II should, therefore, not be seen as a mere “waiting room” prior to the adoption of the euro.
My main focus thereby will be on what central banks can and should do. Why are loans useful from an economic perspective? Lending is one of the cornerstones of a successful economy based on the division of labour. This fact has been recognised since ancient times (cf. slide 5). As much as 5,000 years ago in Mesopotamia, seeds for crops were made available on loan, with repayment including interest due after harvest. Loans were also commonly used in ancient Greece and Rome. 1 Lending in its present form dates back to the emergence of the ‘modern’ banking system in Europe in the late Middle Ages. 2 To this day, banks fulfil key functions in brokering loans. Without them, efficient large-scale lending as we know it would not be possible. 3 Most recently, alternative methods of credit provision have emerged thanks to digitalisation – P2P or crowd lending for example. Nevertheless, banks remain the mainstay of an effective credit system. I will now explain why growth and prosperity would be significantly lower without an efficient credit system. To do so, I need to clarify the two basic functions of loans (cf. slide 6). First, loans enable borrowers to have future income at their disposal now. And second, loans allow creditors to make optimal use of their available capital. Loans enable borrowers to have future income at their disposal now  Let me explain this in greater detail. Regarding function number one: Without loans, expenditure at any given time is limited to one’s savings and one’s current income.

The subsequent path is somewhat uneven as the VAT cut is reversed next January, but the broad picture is for inflation to continue to run well below the target in the medium term, as the downward pressure from the substantial margin of spare capacity outweighs the waning impact on import and consumer prices of the lower level of sterling. So the Monetary Policy Committee will probably need to take further action to return inflation to the target in the medium term. That is a discussion we will no doubt have at future meetings. Before finishing, I want briefly to reflect on what this crisis means for the UK’s macroeconomic policy framework. For 16 years, the inflation targeting framework worked pretty well, delivering steady growth and low and stable inflation. In particular, the United Kingdom managed to come through the Asia/LTCM crisis of 1997-8 and the aftermath of the dot-com bust in 2001-3 relatively unscathed. But plainly it hasn’t prevented things coming unstuck now. What has gone wrong? This recession is rather different from its three large post-war predecessors, each of which was associated with policy actions to curtail an inflationary boom that had got out of hand. On this occasion, the boom was not in the market for goods and services, as the data on growth, unemployment and inflation bear witness. Rather it was associated with a debtdriven boom in asset prices, including property. But the bust has not been confined to asset markets and has instead infected the real economy of businesses and jobs.
Since the end of June, the trade-weighted US dollar has risen by nearly 10%. By contrast, the trade-weighted euro has lost over 3.5%, while the yen has lost almost 12% of its value. Chart 2 shows that, since the middle of the year, the strength of the US dollar has also made itself felt with respect to the Swiss franc. However, the chart also shows that the Swiss franc has become stronger against the euro over the past few months. It is likely that this is mainly due to two factors. On the one hand, the disappointing path of the euro area economy, and the further easing in monetary policy associated with this, have been responsible for a weakening in the euro. On the other, the pressure on the Swiss franc has reflected the strong demand for safe investments, particularly in periods of increased geopolitical tension. Since  BIS central bankers’ speeches  1  mid-year, the trade-weighted Swiss franc exchange rate has barely changed overall. Thus, the Swiss franc is still high. Reform efforts in the area of interest rate and foreign exchange benchmarks This brings me to the progress that has been made in reforming interest rate and foreign exchange benchmarks. In recent years, revelations of manipulations have undermined the credibility of these benchmarks. At international level, the Financial Stability Board (FSB) is coordinating the reform efforts. At the same time, country-specific reforms are being implemented at national level.

As the history of the Industrial Revolution which began shortly after Adam Smith’s death demonstrates compellingly, there will always be people who endure great difficulties when rapid economic change occurs. Chairman Greenspan has recently noted that “a significant minority, trapped on the adverse cycle of the market’s process of creative destruction, are suffering. This is an issue that needs to be more fully addressed if globalization is to sustain the public support it requires to make further progress.” Perhaps this will indeed be one of the major challenges we will face in the years to come. Dealing with it by way of relentless government interference with the forces of the free market will at best fail to produce desirable results. At worst, it will begin to reverse the dramatic welfare gains we have enjoyed since the time of Adam Smith. 2  BIS Review 38/2005
This has prompted several emerging economies to restructure their fuel subsidies in an effort to create more efficient economies and to achieve more sustainable fiscal positions. This has been followed by the consequent adjustments in consumer prices as the gap between international market prices and domestic prices narrow. In Malaysia , petrol prices were adjusted by  BIS Review 90/2008  1  40.6% while diesel prices by 63.3%. This adjustment would be reflected in the consumer price inflation in June, which is expected to exceed 6%. Beginning 1 July, electricity tariffs have also been raised by up to 18% for households and an average of 26% for some commercial and industry users. While domestic inflation is expected to remain elevated for the remaining part of this year and early next year, it is expected to moderate in the second half of 2009. In the current international environment, the policy response needs to be contextualised to the conditions prevailing in each individual economy. In those economies that are experiencing overheating and strong demand conditions, there is greater clarity in terms of the need for policy to rein in demand. However, for economies that are experiencing moderating growth, the risks to growth and inflation need to be carefully evaluated. In addition, consideration needs to be given to the deflationary impact of the fuel price increases on consumption.

In the United States the real earnings trend since 1940 has been virtually constant between 2% and 3%, while - as I just mentioned - the real return on shares shows a trend break after 1982 (Fig. 3).2 Are present share prices fundamentally justifiable? I shall now use a simple model to examine whether the present level of share prices can be justified in fundamental terms.3 Simplifying somewhat, this model equates the value of a share with the present value of the future income the share is expected to generate. A valuation in P/E terms accordingly rests on the assumptions that are made about these future incomes - the future growth of the company’s earnings - and the factor by which these incomes are discounted - the stock market’s expected return. We can insert alternative values for these assumptions to find the combinations that might justify different P/E ratios (Fig. 4). It will be seen that a P/E ratio of 14 can be warranted if the expected real return is 6% and the real growth of earnings averages 2.5%. These figures are all approximately in line with the historical trends.