samchain/econo-pairs-v1 huggingface dataset:
Willem F Duisenberg: New economy, financial markets and monetary policy Speech by Dr Willem F Duisenberg, President of the European Central Bank, at the meeting of the Zürcher Volkswirtschaftliche Gesellschaft, Zurich, 19 May 2003. *  *  *  Introduction Ladies and Gentlemen, I am delighted to be here to address you this evening, and I should like to start by thanking the Zürcher Volkswirtschaftliche Gesellschaft for inviting me to do so. Being trained economists, you all know that in the course of the past century, monetary theory has faced significant challenges from various angles - the Keynesian revolution, the neo-classical synthesis, the monetarist counter-revolution, the emergence of new classical economics with the introduction of the concept of rational expectations, and real business cycle theories. Similar to the experience of monetary theory, monetary policy has had to cope with major challenges as well. We all know that the economic and financial environment in which monetary policy has to operate is continuously changing. During the past few years - as has been rather obvious - these changes have included the discussion about a “new economy” and, driven by the interrelated processes of financial liberalisation and financial globalisation, the growing importance of financial markets. You may wonder why someone should raise the topic of the “new economy” again, as it has been discussed so extensively by many, including myself, on many an occasion before. Is this not a topic which has actually become rather “old” by now; another chapter in the history books of economic science?

The excesses, which were particularly evident in the stock markets, are the most notable expression of the interaction of the belief in the “new economy” with developments in financial markets. However, the growth in debt markets also played its role. The introduction of the euro and the start of the single monetary policy seem to have had a strong, positive impact on the possibilities for corporate issuers both financial and non-financial - to resort to corporate bond issuance as a financing source. In addition, this process was fuelled by the surge in mergers and acquisitions, as more and more companies prepared to grasp the opportunities of the new dynamic environment. Furthermore, issuance activity by certain sectors linked to the “new economy”, such as the telecommunications and high-tech sectors, promoted the development of certain segments of the bond markets, for example the market for high-yield bonds. 2  B. van Ark, “Measuring Productivity in the “New Economy”: Towards a European Perspective”, De Economist 148, No.1, 2000, pp.87-105. 2  BIS Review 23/2003  We all know where all this optimism about the “new economy” led to. Since March 2000, we have seen both a substantial decline in stock prices and rising financial imbalances. I shall now discuss the aftermath of the boom and burst period that we experienced in financial markets.
BIS Review 41/2005  1  Moreover, there is another new trend, which was less evident one to two years ago, namely the speed at which competition in the food retail sector would intensify. The restructuring of the retail trade that took place earlier in the United States has now come to Sweden, albeit in a different form. New foreign companies and new business models reduce the labour-intensity and price levels in the retail food sector, where prices for staple products can differ as much as 30 per cent from low-price chains to normal food stores. There were few who could predict the speed of this change, with new food store chains that all together plan to establish hundreds of new low-price stores in one year. The very nature of these forecasting errors is important to the way we assess the consequences. As employment has been weak during this economic upswing, and total unemployment is at a high level, many debaters have emphasised the link between low inflation and the labour market. They wish to imply that demand in the economy is insufficient because of an excessively tight monetary policy. But this is hardly the case; all of the effects the forecasters have underestimated are supply effects, which reduce inflation because of better and more efficient conditions for production, and not effects that reduce demand. What we are seeing is the reverse; that the expansionary monetary policy has a fairly tangible impact.

In this regard, one of the statutory tasks of the Eurosystem is, according to the Treaty, to contribute to the smooth conduct of prudential supervision policies and the stability of the financial system. I am therefore convinced that the involvement of central banks in this issue will remain absolutely crucial. •  Finally, since the tragic events of 11 September and their impact on financial stability, concerns over the potential abuse of the financial system for the financing of terrorism have received top priority in international and European regulatory discussions. The international community and, within it, the financial community, should step up its efforts to hunt down money used by organised crime and terrorism. We shall not be successful overnight, but, today, there is a strong political determination on the part of the international community to co-operate on this issue. As far as the fight against organised crime and terrorism is concerned, we can no longer accept that certain players are not prepared to observe the rules of international legal co-operation. rd  Beyond structural reforms and financial stability, the accession of new Member States to the European Union and to EMU is the third challenge that I have identified. The last challenge but not the least. Accession of new Member States to the EU and EMU Twelve countries from central, eastern and southern Europe are currently negotiating accession to the EU, of which ten, according to the calendar endorsed by the European Council, will join the E.U.
Inflation and interest rates should be low and in line with those in the other participating countries. The exchange rate should be stable. Last, but certainly not least, the budget deficit should be under control and the level of official debt sustainable. Over the last five to ten years, most member states of the EU have come a long way towards fulfilling these criteria. Inflation rates are at or close to historical lows in various countries. The same is true for interest rates, where differentials have diminished considerably. Much less successful was the quest for fiscal stability. Budget deficits in most countries are still too high and debt levels have often, instead of falling, risen over the last years. Without any doubt, the pursuit of the convergence criteria with a view to joining the EMU has been instrumental in improving economic policies in various member states of the EU. Who, for instance, would have thought ten years ago that Italy would today post an inflation rate lower than the one in Germany? Yet, despite the progress achieved over the last decade, two problems remain: First, convergence in important areas is still far from being satisfactory. Second, the convergence criteria require the aspiring members of the EMU to achieve certain goals by spring 1998. But what about their future policies? There is a widespread belief in the economics profession that nominal convergence -- as expressed by the convergence criteria -- is less important for a successful monetary union than real convergence.

Summing up, although I described our market infrastructure in Hong Kong as relatively mature, you will have realised - if you were ever in any doubt - that there is no shortage of change and of potential new opportunities, although possibly not so many as in one or two of the other economies, which I reviewed earlier. I hope that all of you will participate in the continuing evolution of Hong Kong’s capital markets, and use Hong Kong as your base for incursions into other territories where similar or greater opportunities exist. Our aim in Hong Kong is to provide an open and welcoming environment for business, and to be judged on our merits as a truly international centre which possesses that all important critical mass across the full range of financial, professional and commercial services and is ideally located as a hub for the region’s future development. Note: FDI=inward foreign direct investment; for India the first three columns are 198896, and the fourth 1991-96. BIS Review 52/1999  4  5  BIS Review 52/1999
The first is, the COVID-19 shock hits the Thai economy at particularly where we are vulnerable. If we look back at the previous crises which the world economy faced - for example, the 2008 global financial crisis - Thailand got hit very little. We went through that crisis relatively quite well. However, due to the nature of this crisis, COVID-19 hits us exactly where we are vulnerable. This is because we are an economy which highly depends on tourism where the share of services to GDP is very high. Therefore, this makes our recovery much slower than other countries in the region. The second point is that our recovery has been uneven. Certain sectors have recovered quickly. For example, the manufacturing production index is roughly about 95 out Page 1 of 11  of 100 percent back to where it was pre-COVID. A similar picture would be on the export side where the current value of our exports, excluding gold, is actually higher than the pre-COVID level. But for other sectors, like the service sector, the service production index is still tracking roughly at about 70 percent of where it was pre-COVID. This is also due to our high dependency on tourism, and foreign tourists are basically not able to come back. This has accounted for both, our relatively slow recovery and the very uneven nature of the recovery. But one point, if I might add, is that it could have been much worse.

In particular, critical financial institutions were not resilient enough to cope with large scale disruptions without assistance, and problems in one institution quickly spread to others. In response, the Federal Reserve has made significant changes in how we regulate and supervise financial institutions. We have raised capital and liquidity requirements, put banks through annual stress tests, established the Large Institution Supervision Coordination Committee (LISCC) to enable us to evaluate the largest firms collectively and relative to one another, and set up the Office of Financial Stability to enable  9  The Federal Reserve was unable to prevent the bankruptcy of Lehman Brothers. 10  For example, see “Federal Reserve: Emergency Lending,” Marc Labonte, Congressional Research Service, January 6, 2016. 11  In retrospect, I believe more government support could have been provided to homeowners. Although the Federal Reserve did not have the authority to implement a mortgage modification loan program, we did implement a mortgage-backed securities purchase program to lower mortgage interest rates. 4  BIS central bankers’ speeches  us to look at the financial system more holistically. Financial stability now receives the attention it deserves. For example, there are now regular briefings and discussions on financial stability at FOMC meetings. As discussed earlier, the Federal Reserve has the responsibility to be the lender of last resort. In normal times, this occurs through discount window lending to depository institutions. During the financial crisis, Section 13(3) of the Federal Reserve Act enabled extensions of credit in “unusual and exigent” circumstances to individuals, partnerships and corporations.
The Bank of Albania acknowledges and appreciates the importance of having a well-informed and well-educated public in the transmission of monetary policy to the economy, by taking timely, right and rational decisions. In this context, our activities in the area of public’s financial education intensified further in 2009 through the expansion of age groups and greater geographical coverage. In figures, for the period 2008–2009:   were distributed a total of 21 000 educational leaflets;    were held training seminars for around 170 teachers teaching Economics in Tirana, Vlora, Korça, Shkodra, Gjirokastra and Elbasan;    were held 20 meetings with different stakeholders in Tirana, Vlora, Korça, Gjirokastra and Shkodra;    the competition “The Real Value of Money” was organized in Tirana, Vlora, Shkodra, Korça and Gjirokastra, with a total of 100 high schools taking part;    were held seminars for 60 social workers in Tirana;  8  BIS Review 78/2010    were held full cycles of training seminars and lectures for the journalists;    the Governor held 7 lectures for students in Albania and abroad;    Bank of Albania Day was organized in four universities. Lastly, the redesign of the Bank of Albania website in the beginning of 2009 provides a more efficient portal for the provision of information, making it efficient, re-arranged and user-friendly.

Total liquidities settled in the AIPS system during 2009 is about 4.3 times higher than the GDP. 3.2  European integration  The Bank of Albania plays a key role in the European integration process. The Bank of Albania has been active in revising the National Plan for the Implementation of the SAA for the period 2009–2014. The Bank of Albania has prepared monthly progress reports that reflect the achievements in terms of the accomplishment of the legal measures and implementing activities, and a description of the level of compliance of judicial acts approved by the Bank of Albania with the acquis communautaire. 3.3  Communication and transparency  Public communication was one of the major priorities of the Bank of Albania in 2009. We have aimed at transmitting the Bank of Albania’s decision-making to the financial market, other decision-making institutions, media, other economic agents and the public at large, timely and efficiently. The Bank of Albania’s communication has been materialized through added transparency in:   our analyses of economic and financial developments at home,    the risk balance and potential implications for the economy,    the entire regulatory and supervisory activity of the banking system. With the belief that added transparency is translated into higher integrity and transparency, the Bank of Albania has been paying an increasing attention to public education as well.
John C Williams: A different kind of recession Remarks (via videoconference) by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Institute of International Finance: Central Banking in the Age of COVID-19 Summit, 30 June 2020. * * * As prepared for delivery Thank you for the warm introduction. When the United States entered the pandemic in March, I never expected that three and a half months later I would still be making speeches from my apartment: I look forward to the day when gathering in groups is safe and we can meet in person. We're now 17 weeks into a catastrophic pandemic which has cost over 500,000 lives worldwide and has had a devastating effect on economies across the globe.1 Today I'm going to talk about the current state of the U.S. economy, our goals for the recovery, and how the Federal Reserve is responding to the worst recession in living memory. Before I continue, let me give the usual disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. A Different Kind of Recession The economic effects of the coronavirus have caused great hardship and created enormous uncertainty. The root of this downturn—a global pandemic—means this is a completely different kind of recession compared to anything we've experienced in the past.

As the pandemic unfolds, many people are starting to ask questions about our economic future: What will the recovery look like? When will it begin? And how will it be affected by the virus? It's easiest to start with the last of these questions first. The virus will continue to be at center stage throughout the economic recovery. We are traveling down a narrow path, balancing a return of economic activity with effective containment of COVID-19. The overall unemployment rate reached nearly 15 percent in April, and around 20 million Americans have lost their jobs—numbers I hoped I would never see in my lifetime. These figures understate the full extent of the pandemic's toll on the economy. The pandemic and the ensuing economic downturn have done disproportionate harm to communities of color. Black and Hispanic families, as well as lower-wage workers, have suffered the most.2 Those who least can afford it have been hardest hit, making a strong and full economic recovery of paramount importance. As the recent surge in cases in some states demonstrates, much is still unknown about how the pandemic will play out in the months ahead. That said, there have been signs that we may be past the worst of the extreme economic distress, and early indications of a recovery have started to emerge. As states began to open up and people returned to eating in restaurants and shopping in stores we've seen sizable increases in consumer spending. We've also seen increases in building permits, signaling a turnaround in the construction industry.
That is why G20 reforms have significantly increased the standards to which CCPs are held, ranging from higher margins and liquidity to better operational and cyber resilience.28 To finalise its policy work, the FSB will report to G20 Leaders next month on the need for guidance on CCP financial resources in resolution.29 Now is the time for FSB members to address any gaps in their supervisory and resolution frameworks for CCPs. For example, some authorities do not yet have all of the resolution powers expected under FSB standards. And it’s time for the FSB (in conjunction with CPMI-IOSCO) to assess whether, when taken together, reforms to resilience, recoverability and resolvability are sufficient and are working as intended. A decade on from the financial crisis, a series of measures are eliminating the fragile forms of shadow banking while reinforcing the best of resilient non-bank financial intermediation. The toxic forms of shadow banking at the heart of the crisis – with their large funding mismatches, high leverage and opaque, offbalance-sheet arrangements – no longer represent a global stability risk (Chart 4). And other, more constructive forms of non-bank finance, including money market funds and repo markets, are subject to new policy measures that reduce their risks and reinforce their benefits. 27  See FMSB Annual Report (2017) for examples of misconduct over two centuries. See CMPI-IOSCO’s Principles for Financial Market Infrastructure (PFMI). 29 FSB Chair’s Letter to G20 Finance Ministers and Central Bank Governors, March 2018.

Carney, Mark (2018), From protectionism to prosperity, speech given at the Northern Powerhouse Business Summit, Gateshead, 5 July. Carstens, Agustín (2018), Global market structures and the high price of protectionism, speech given at the Federal Reserve Bank of Kansas City’s 42nd Economic Policy Symposium, Jackson Hole, Wyoming, 25 August. Frankel, Jeffrey and David Romer (1999), Does trade cause growth?, American Economic Review, 89 (3), pp. 379–399. International Monetary Fund (2006), World Economic Outlook, April. International Monetary Fund (July 2018), G-20 Surveillance Note, G-20 Finance Ministers and Central Bank Governors’ Meetings, Buenos Aires, Argentina, 21/22 July. International Monetary Fund (October 2018), World Economic Outlook, October. OECD (2016), OECD Economic Outlook, Volume 2016, Issue 2. Ricardo, David (1817), On the principles of political economy and taxation, London: John Murray. Sachs, Jeffrey and Andrew Warner (1995), Economic reform and the process of global integration, Brookings Papers on Economic Activity, 1995 (1), pp. 1–118. World Trade Organization (2017), World Trade Report.
But, given the stickiness of pay and prices, that would necessitate inefficient fluctuations in activity and employment. Now during the first decade of the MPC, such shocks were small and generally benign, with access to cheap manufactures from emerging economies providing steady downward pressure on prices. But the past few years have provided a less felicitous backdrop. Not only have we had to deal with the consequences of the financial crisis but we have also had to manage several major cost shocks. These include: a 25% fall in the sterling effective exchange rate; fluctuations in the price of oil between $ and $ a barrel; and movements down and up in VAT. Moreover, the impact of these changes has often proved hard to predict. For instance, we significantly underestimated the pass-through into inflation  1  See e.g. Bean et al. (2011). BIS central bankers’ speeches  1  of the exchange rate depreciation. So it should not be surprising that inflation has been both higher and more variable than during the Great Moderation. The question is: would outcomes have been materially better under an alternative framework, such as a nominal income target? The first thing to be said is that the idea of directing macroeconomic policy towards targeting nominal income is by no means new.

Under a nominal GDP target, the above expression for Vt is replaced by: Vt = (yt – y*t)2, where yt is nominal income and y*t is the corresponding target level. 8  BIS central bankers’ speeches  References Bean, C.R. (1983). “Targeting nominal income: an appraisal.” Economic Journal, vol. 93, (December), pp. 806–19. Bean, C.R. (1998). “The new UK monetary arrangements: a view from the literature.” Economic Journal, vol. 108, (November), pp. 1795–1809. Bean, C.R. (2009). “The meaning of internal balance thirty years on.” Economic Journal, vol. 119, (November), pp. F442–460. Bean, C.R., Paustian, M., Penalver, A. and Taylor, T. (2011). “Monetary policy after the fall” in Macroeconomic Challenges: The Decade Ahead, Federal Reserve Bank of Kansas City. Brittan, S. (1981). “How to end the monetarist controversy.” Hobart Paper no. 90, London: IEA. Carney, M. (2012). “Guidance.” Remarks to CFA Society, Toronto, 11 December, Bank of Canada. Meade, J.E. (1978). “The meaning of internal balance.” Economic Journal, vol. 88, (September), pp. 423–35. Meade, J.E, Vines, D. and Maciejowski J. (1983). Stagflation: Demand Management. London: Allen & Unwin. Tobin, J. (1980). “Stabilization policy ten years after.” Brookings Papers on Economic Activity, vol. 11, pp.19–90. Weale M., Blake A., Christodoulakis N., Meade, J.E and Vines D. (1989). Macroeconomic Policy: Inflation, Wealth and the Exchange Rate. London: Unwin & Hyman. Woodford M. (2012). “Methods of policy accommodation at the interest-rate lower bound.” Federal Reserve Bank of Kansas City Symposium, Jackson Hole.