samchain/econo-pairs-v1 huggingface dataset:
Sim Kee Boon helped to chart Singapore’s economic development through the turbulent 1970s, when stagflation and oil price shocks shook the world’s economies. We are living in even more interesting times today. 27. The Institute has gathered an impressive collection of talent here today. I wish you fruitful discussions. Thank you. 4  BIS central bankers’ speeches

Mario Draghi: ECB press conference - introductory statement Introductory statement by Mr Mario Draghi, President of the European Central Bank, and Mr Vítor Constâncio, Vice-President of the European Central Bank, Frankfurt am Main, 21 July 2016. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis. Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. Regarding non-standard monetary policy measures, we confirm that the monthly asset purchases of € billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. Today we discussed developments since our last monetary policy meeting in early June. Following the UK referendum on EU membership, our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience. The announced readiness of central banks to provide liquidity, if needed, and our accommodative monetary policy measures, as well as a robust regulatory and supervisory framework, have all helped to keep market stress contained.
Figure 3 shows two summarising measures for the deviations between market expectations according to forward rates and the Riksbank’s repo rate forecast at the time of all 18 publications. 7 We can see that the deviations have become larger since the financial crisis erupted, which is natural as uncertainty increases. Looking at the whole period since 2007, however, there does not appear to be any systematic deviation in any direction (the average deviation is approximately zero for the whole period). It is important to point this out. One question that may nevertheless arise is why market expectations deviate from the Riksbank’s forecast. Figure 3 Deviations during the forecasting horizon between the repo rate path and market expectations according to forward rates Percentage points  Note. For a description of the calculations, see footnote 7. Sources: Reuters EcoWin and the Riksbank. 7  The measures show the following: at the time of a given forecast the difference between market expectations and the Riksbank’s forecast for the repo rate 1 to 12 quarters ahead are measured. This thus gives 12 different deviations for each time of publication. One measure gives the average of all 12 deviations. The other measure shows a “standard deviation”, where the sign of the deviation is unimportant. 6  BIS Review 85/2010  …and what are they due to? To begin with, I would like to make the reservation that market expectations cannot be observed, they can only be estimated.

Experiences so far show that the work on the repo rate path and publication of the path have functioned well. To crown it all, we have gained a monetary policy discussion that is aimed more at long-term issues and not merely at whether or not the interest rate should be altered a stage. My view is that our own repo rate path is quite clearly preferable to the other two alternatives that were tested. I believe that this is also the predominant view of most of those outside of the bank, now, three years later. The repo rate path served us well during the crisis. We were able to clearly signal that the repo rate will be low for a long period of time to alleviate the effects of the fall in demand and to attain the inflation target. There have been slight differences of opinion among us Executive Board members with regard to the time when an increase in the repo rate will begin. But these have been only slight, the larger moves have been clear. It has been necessary to have a low repo rate over a long period of time. In this context, changes in the repo rate amounting to 0.25 percentage points slightly sooner or later do not make a significant difference. According to our repo rate forecast in April, the real repo rate will have been below zero for two years, and it will remain low throughout the forecast period.
In the wake of spillovers from the US taper tantrum, guidance was used to anchor policy expectations in the face of a still fragile euro-area recovery (Chart 2). The ECB stated that rates were expected to remain at present or lower levels for “an extended period of time” based on “an overall subdued outlook for inflation extending into the medium term and subdued monetary dynamics”. In subsequent episodes, ECB guidance on interest rates has always been tied to the outlook for inflation, with its time contingent nature becoming more specific, first with links to the duration of asset purchases and more recently to specific calendar dates. In its most recent statement, the ECB indicated it expected interest rates to “remain at their present levels at least through the first half of 2020”. 4  See Bholat, Broughton, Parker, Ter Meer and Walczak (2018), Enhancing central bank communications with behavioural insights, Bank of England Staff Working Paper No. 750. 5 See verbatim of the remarks made at the Global Investment Conference in London, 26 July 2012.

There are also signs that productivity growth in service sectors is slackening. We are now seeing the first signs of higher wage growth. We cannot ignore previous episodes of abrupt shifts in wage growth during boom periods. On the other hand, improved labour market adaptability and the supply of foreign labour may have a dampening impact. Unemployment may thus stabilise at a lower level than earlier. Moreover, the social partners’ experience of the impact of substantial wage increases on interest-rate setting may also restrain pay increases in the centralised settlements. Economic policy will increasingly have to reflect the capacity constraints facing many Norwegian enterprises. Given the high level of activity and the prospect of a pick-up in inflation, it is appropriate to increase the policy rate from today’s level of 3.75 per cent. We envisage a gradual interest rate increase towards a more normal level of a little more than 5 per cent. Economic developments are uncertain. The uncertainty surrounding the interest rate ahead is illustrated by the shaded area in the chart, which is intended to capture the outcome with a 70 per cent probability. 6  BIS Review 15/2007  In Norway, inflation fell markedly from the end of the 1980s up to the mid-1990s and has subsequently been low and stable, with considerably less variability than earlier. Inflation has averaged around 2 per cent over the past 5-10 years, i.e. somewhat lower than the target. Thus, the growth potential of the Norwegian economy has been strong and higher than expected.
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.

It is also possible that the increase in debt is partly an adjustment  4  BIS Review 51/2004  to an economy with - compared with before - better functioning financial markets, low inflation and expectations of relatively low interest rates in the future. Most indications also suggest that the majority of households would be able to service their debt even if interest rates were to rise sharply. Nor does it appear likely that banks and mortgage institutions would risk incurring losses that would appreciably affect their capital bases. This wasn’t the case either during the financial crisis at the beginning of the 1990s. While the banks’ losses during the crisis were largely propertyrelated, they did not stem from lending against collateral in housing but from loans secured by commercial properties. And prices of commercial properties have this time not at all shown the same development as prices of residential property. On the contrary, they have fallen during the economic decline and have still not recovered. What remains then are the effects on the economy in general. In this respect it is perhaps first a question of whether the build-up in debt and developments in house prices should prove unsustainable, that the prices therefore should fall and that this on the whole should result in a decline in the real economy in general. The risk of this happening is of course related to your view of residential property prices.
household 70 ahead items  80  240  70  210  60  60  180  240  Housing (3)  210  Commercial  180 Consumer  50  50  150  150  40  40  120  120  30  90  90  20  60  60  Current personal economic situation  30 20 07  09  11  13  15  IPEC 02  17  05  08  11  14  17  (1) Value above (below) 50 indicates optimism (pessimism). (2) Weighted averaged rates of all operations performed in each month. (3) Loans denominated in UFs. Sources: Adimark and Central Bank of Chile using SBIF information. Figure 6 Contribution of GFCF to annual GDP growth  Imports of capital goods (annual change, percent)  (percentage points)  2.0  2.0  1.5  1.5 GFCF  1.0 0.5  1.0 Machinery & equipment 0.5  0.0  0.0  -0.5  -0.5  -1.0  -1.0  -1.5  Construction & -1.5 other works -2.0  -2.0 15  16  17  80 60  80 Total  60  40  40  20  20  0  0  -20  -20  Minus other -40 transportation (*) -60 -60 10 11 12 13 14 15 16 17 -40  (*) Excludes non-regular transportation vehicles (airplanes, ships, helicopters and trains). Source: Central Bank of Chile.

In fact, what the economy needed was a greater monetary boost that would help offset the negative effects of the end of the commodity super-cycle and the weakness the economy had shown in recent years. In this sense, although the recent appreciation of the peso is an important development and will undoubtedly affect the evolution of inflation in the short term, as reflected in the projections that I have just shown, its implications for monetary policy are not evident as long as its direct or indirect effects do not imply that the convergence of inflation to the target in the policy horizon is compromised. 6  About our domestic economy, the baseline scenario assumes that the factors that have reduced activity and inflation in recent months are transient. However, their persistence may be different than anticipated. On activity, a fraction of the lower growth responded to more persistent investment-related factors. This may be accentuated, for example, if confidence indicators regress. In any case, it cannot be ruled out that the economy may return to higher growth rates faster than assumed in the baseline scenario. This, considering that the labor market has not deteriorated any further, the cost of credit is low and expectations have improved somewhat, which could lead to more dynamic consumption. Inflation has fallen beyond forecasts and is now below 2%. Expectations at shorter terms are down from the cutoff date for the last Report, but at longer terms they show no major changes and remain anchored to the target.
It peaked at 13%, which is very high, at the height of the crisis and now it’s at 9.8%, so it’s below 10%. The euro area has created 4 million jobs in four years, that’s not bad. Yes, this morning we have to say “Thank you, ECB”. The Banque de France has just said this morning that it is lowering its growth forecast for France to 1.3% for 2016 and 2017, and then to 1.4% in 2018 because of the worsening international environment. Is the Banque de France more pessimistic than the ECB? Because you are saying that the growth situation isn’t bad in France. No, we agree with the Banque de France – growth will be weaker in France than in the rest of the euro area, unfortunately. 1.3%, 1.4%? Yes, 1.3% in France, 1.7% in the euro area, so France is lagging behind in terms of growth. And what does France have to do to recover or catch up with the other countries? When you read the programmes of the candidates for the presidency, whether on the right or the left, do you ever say to yourself that this one or that one would enable France to catch up? The ECB doesn’t get involved in politics...  Of course. So don’t expect me to express a preference for one of the candidates. However.

The problems Europe is facing – terrorism, security, the refugee crisis, but also growth and employment – are problems that we have to overcome together, and if each government turns inwards to focus on national interests and preparing for elections, there will be no more capacity for acting as one. And at the same time, Donald Trump is setting an example, a bad example, and the United States will become inward-looking as well. Geopolitical risk – the risk of a change in the international balance of power – is another risk 3/4  BIS central bankers' speeches  Europe will have to face next year. Benoît Cœuré, should the whole of Europe be worried about a banking crisis? Because among the uncertainties, and even though we were told that the banks were sound, we’re hearing that Deutsche Bank has problems, that Portuguese and Italian banks are struggling, and that certain banks have to be recapitalised. What do you say to that? I don’t believe there will be a banking crisis, but I do think that European banks have profitability problems and that there are too many banks in Europe, so reforms are needed. In other words, some banks have to go. Yes, but that’s an issue for the banks themselves. Solutions must come, first and foremost, from the private sector – banks are commercial enterprises and public money won’t resolve the issue. So banks will disappear, but not in France. Just to reassure us, how are the banks doing?
The funds diverted to those counterparties reduce the amount available to others, intensifying the scramble to get to the front of the line. For non-financial firms, an automatic stay mitigates a disorderly destruction of value. But banks are in the business of circulating funds and cannot function under a persistent payment freeze. There are also wider economic costs. Smaller firms without easy access to public debt markets face switching costs if they have to establish new banking relationships. While they are searching for new credit, they are likely to cut spending, adversely affecting the economy.6 Failure therefore brings substantial costs, for both the failed bank’s creditors and wider society. The equity owners need not internalize all these costs so debt finance should carry a risk premium, incentivising equity to be preferred over debt, ie lower leverage.7 Taken together, these various departures from Modigliani-Miller’s simple world mean that a bank’s overall funding costs do depend on its capital structure, but in a non-linear way. So long as a bank’s capital buffer is sufficient to make the perceived probability of bankruptcy remote, the bank will most likely want to economise on equity, if only for tax reasons. By contrast, if capital levels are too thin, bankruptcy will be a real possibility. Economising on equity capital is then likely to prove counter-productive as debt-holders, with an eye to the costs of resolution or liquidation, will demand ever higher rates of interest.

To put it very simply, incentives drive behavior, and behavior establishes the social norms that drive culture. If the incentives are wrong and accountability is weak, we will get bad behavior and cultures. This implies a role for both firms and supervisors. Firms need to continually assess their incentive regimes so that they are consistent with good conduct and culture. When they are not consistent, the incentives need to be changed. Supervisors should also play a role in assessing firms’ incentive structures. For example, they should evaluate: 1/3  BIS central bankers' speeches  How is compensation determined? In particular, is questionable conduct―such as compliance violations―consistently reflected in decisions about compensation and promotion? Do risk managers have the appropriate authority to challenge frontline revenue producers and prevent activity that is questionable? When that occurs, are there appropriate negative consequences for the frontline revenue producers? When people speak up to point out potential conduct issues, how are they treated? Are they held up as examples to emulate, or are they discouraged or even penalized? The answers to these questions should indicate whether incentives must be changed in order to foster the appropriate behaviors and culture. The primary responsibility for reforming culture—and changing incentives—belongs to the industry. However, the industry does not act alone. The public sector can play an important role as well. I’ll discuss that issue this morning with my colleagues Norman Chan, chief executive of the Hong Kong Monetary Authority, and Minouche Shafik, deputy governor of the Bank of England.
The inflation target is the overriding objective of monetary policy. As before, the new act states that price stability is the primary objective of the Riksbank. It is now also stated more clearly that price stability means sustained low and stable inflation. In concrete terms, the inflation target is the same as before, that is, a target of 2 per cent for inflation measured as the annual change in the CPI with a fixed interest rate, the CPIF. If the Riksbank wishes to change the specification of the target at some point in the future, the Riksdag must approve the new specification before it can take effect. The Riksbank shall conduct monetary policy in an independent manner to attain the inflation target – this is a decisive factor for maintaining confidence in the target. However, this independence does not, of course, prevent us from discussing issues relevant to monetary policy with the Riksdag and the Government, as well as other authorities and organisations – as indeed we should, in my opinion. The Riksbank also takes into account the real economy. According to the new Sveriges Riksbank Act, the Riksbank shall also take into account the development of the real economy. Previously, the Riksdag assumed that the Riksbank would take the real economy into account, but this was not explicitly stated in the text of the Act. The new Act states that the Riksbank, without neglecting the inflation target, shall contribute to a balanced development of production and employment.

If I see inflation continuing to rise and, most importantly, inflationary expectations beginning to spread, I will be the first out of the box to advocate the removal of the substantial monetary accommodation now in place. I cannot think of anything more damaging to the welfare of hard-working Americans who have jobs, those who are unemployed and barely eking out a living, retirees who are earning minimum returns on their savings, or any consumer already stretched thin, than to have their purchasing power reduced by still higher inflation. Yet even though I am a central banker and am professionally disposed to being a worrywart, I am more optimistic about the economic outlook than the consensus. American businesses and workers have made very important improvements in their efficiency and competitiveness that will aid growth. If we can add to that a sound long-run budget deal, the recovery could gain even more strength. We are a resilient people. I know it is fashionable to think we have somehow been infected with an economic stasis with no way out, but as a Texan and an American, I am culturally unable to accept that view. During the Q&A that followed a recent speech of mine abroad – in New York – a questioner cited the sickly economic pace of the first quarter and then recited the consensus view that very weak growth will likely ensue for the rest of the year and beyond. In response, I cautioned that forecasting based on current trends can be very misleading.