samchain/econo-pairs-v1 huggingface dataset:
François Villeroy de Galhau: Exiting unconventional monetary policies in an uncertain world Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Euro 50 – CF40 – CIGI Roundtable, Paris, 25 October 2018. * * * Ladies and Gentlemen, Bienvenue à Paris. It is a pleasure to welcome you to the Banque de France for this conference on “exiting unconventional monetary policies”. I must say that you have picked the right moment for such a discussion: I have just returned from Frankfurt, where the Governing council of the ECB held a monetary meeting. Like other central banks, we are now pursuing a course of gradual normalisation in an uncertain world. Allow me to begin by giving some highlights on our domestic strategy for the euro area, before elaborating on the challenges that we collectively face at the global level. ** 1. Monetary policy in the euro area: where are we heading? The euro area is experiencing a broad-based economic expansion. Q2 2018 was the 21st successive quarter of economic growth. 9.2 million jobs have been created since 2013 and the unemployment rate has fallen from 12.1% to 8.1%, although this figure is still too high. The output gap was probably closed by the end of last year. Recent survey data on the growth outlook have been somewhat weaker, although less so in France. But our outlook for inflation is still firming.

It is too early to say whether this will eventually affect the distribution of profit to the Confederation and the cantons. There is no need for action at this stage. The profit distribution agreement between the Federal Department of Finance and the SNB sets out clearly defined threshold values for a review. The current agreement – which runs until the end of 2017 – will be reviewed at the latest with regard to the distribution for the 2013 financial year. Should the distribution reserve, which has been built up over the last few years, be depleted before then, the agreement calls for an immediate review. BIS Review 173/2010  3  It is currently too early to say anything definite about the outcome of the review. Seen from the current perspective, it would come as no surprise, however, if the annual distribution had to be reduced somewhat. We have repeatedly emphasised that an annual distribution of CHF 2.5 billion cannot be guaranteed in the long term. 4  BIS Review 173/2010
However, one welcome outcome from this experience is the consolidation of the banking sector, which is much more aware of the constant need for prudent risk management and good corporate governance. From our end, the Bank has also undergone a significant re-orientation of its supervisory techniques and approaches. These are now largely in line with international best practices and also constitute a platform on which we shall meet the future challenges facing the financial sector in the 21st Century. Ladies and Gentlemen, from time to time developments are associated with setbacks and the Bank of Zambia is no exception. Here I am referring to the issue of polymer notes which were introduced sometime last year. The introduction of these notes as we have explained at several fora was meant and is still meant to have cleaner notes in the economy and more importantly to have notes with a relatively longer life-span before replacement, than the traditional paper notes. With a relatively longer life-span, the nation would save resources because the frequency of replacing the notes would greatly be reduced. However, due to technical problems experienced by the printer, most of the notes have been fading faster than expected. May I re-assure the nation that we have continued to work with the printer and a solution is being worked out in the quickest time possible. Needless to say that this problem has posed a big challenge for all of us at the Bank of Zambia.

Madam Chairperson, with respect to its organisational and functional structure, the Bank has overtime undergone modifications to suite its role as a monetary and supervisory authority. In addition, structural changes have been necessitated by the continuously changing demands along with changes in the economy and especially in the dynamic financial markets. From a handful of departments at inception currently, the Bank comprises the following core departments, Economics, Financial Markets, Bank Supervision, Non-bank Financial Institutions Supervision, Banking, Currency and Payment Systems, and the Regional Office in Ndola. The support departments include Procurement and Maintenance, Finance, Bank Secretariat, Human Resources, Information Technology and Internal Audit as well as a Security Division. In order to streamline the operations of the Bank and improve its performance, a performance agreement system for employees was introduced in 1995. This was meant to bring about a new work culture with emphasis on professionalism, based on the philosophy, “The BoZ Way means Action”. Mr President, Ladies and Gentlemen, since the 1996 Bank of Zambia Amendment Act, the Bank has continued to enjoy operational autonomy with regard to the formulation and implementation of monetary policies and attainment of relative financial system stability. The ability of the Bank to continually meet quantitative benchmarks set by Government and cooperating partners, can be attributed to the focus of its monetary policy on creating a stable macroeconomic environment as a precondition for sustainable economic growth.
The pattern is clear from similar periods in the past, for example the autumn of 1998 when Russia suspended payments on parts of it s government debt and a major American hedge fund collapsed. What happens is that certain currencies weaken, others, particularly large ones, appreciate, share prices fall, bond rates are unchanged or rise, short-term interest rates decline and the price of gold moves up. Exchange rate shifts of this type are normally transient. The krona has in fact strengthened just recently as markets have become more stable. The IT bubble has burst At the time of our previous meeting in March, economic activity was slowing generally throughout the world but above all in the United States. This tendency had also reached Sweden. Important factors behind the almost simultaneous and marked deterioration of the global picture and perhaps particularly in the United States were, for example, energy price increases, rising interest rates, falling stock markets and the sudden downturn in corporate investment. The prospect of lower profits, a clear slump on the world’s stock exchanges and more pessimistic expectations have led to a marked worsening of investment activity. To illustrate how they believe the American economy will develop, observers have resorted to letters of the alphabet. A V implied a quick recovery, where the favourable outlook for profits meant that the accumulated imbalances would not be a major problem. This alternative rested on a persistently strong belief in a high potential growth rate, with investment in new technology continuing to play an important part.

3  Long-term interest rates, income growth and house prices  Favourable economic developments in Norway have had an impact on developments in our property markets. House prices have risen sharply over the past 14 years. Real house prices have almost trebled. This rise has been considerably stronger than earlier. Moreover, the rise in house prices has spanned a long period. With the exception of a few months in 2003, house prices have risen continuously since 1992. This is the second longest period of rising real prices since 1819. Statistics for earlier years do not exist. House prices also rose in the 18 years between 1954 and 1972, albeit at a more moderate pace. BIS Review 15/2007  7  Norway is not the only country where house prices have shown a strong rise over a long period. House price inflation has been particularly high in Ireland and the Netherlands, but Denmark, the UK and Spain also stand out. The countries where house price inflation has been high are the same countries where economic growth has been strongest. Since prices are rising in tandem in many countries, it is natural to look for common driving forces. With increasing cross-border flows of intermediate goods, capital and increasingly so labour, prices will largely reflect growth and competition in the global economy. If capital or labour becomes too expensive in one country, businesses can relocate production. Prices for fixed factors of production, such as property, will on the other hand reflect income developments in different countries.
To ensure that affected businesses could access COVID-19 loans quickly and at favourable conditions, the federal government, commercial banks, the Swiss Financial Market Supervisory Authority (FINMA) and the SNB engaged in unprecedented collaboration. The government guaranteed the loans; 2 the banks used their existing client relationships to process applications and disburse the funds; and the SNB set up the COVID-19 refinancing facility (CRF) – a new refinancing tool designed to complement the COVID-19 loan programme. This package of measures enabled firms to receive a government-guaranteed bank loan within one business day at the attractive rate of 0% and with a minimum of bureaucracy, and the banks could refinance their loans at the SNB policy rate of –0.75%.3 In addition to the CRF, the SNB took other measures to facilitate lending. At the recommendation of the SNB, the Federal Council deactivated the countercyclical capital buffer. Doing so made it easier for banks to reallocate capital to where it was most needed. The SNB also raised the exemption threshold on the sight deposits that commercial banks hold at the central bank. Since negative interest is charged only on the portion of the sight deposit account balance that exceeds the exemption threshold, this measure helped substantively lower the interest burden for the banking sector as a whole. 4 Overall, the CRF greatly facilitated the disbursement of COVID-19 loans to firms. Participation was sizeable: 20% of all Swiss firms participated in the programme, with total loan volume amounting to 2.4% of GDP.

And the third, the program design will have greater likelihood to be adopted since it has utilized the best expertise available and has the highest degree of perceived legitimacy, since the governance of the Resolution Board better reflects the interest of all stakeholders, be they borrowers, creditors and private markets. The challenge to IMF reform on crisis prevention and crisis resolution has many dimensions, and recommendations that have been made to address this challenge are wide-ranging. Given the limited time that we have, I hope my contributions today have been useful. In closing, I would like to stress that the IMF has responded well to the needs for reform with new important initiatives and measures that are now showing positive results. I am confident that, going forward, the IMF will be able to come up with a credible reform agenda that will lead to greater improvements in our capabilities to maintain the stable economic and financial environment which is essential for the well-being of the global economy. Thank you. 4  BIS Review 24/2006
This means that the economy has significant excess slack and implies that we face meaningful downside risks to inflation over the next year or two. Also, there are those who express anxiety about whether the Fed has the tools and the will to raise the federal funds rate when the time is appropriate. I want to assure you that the Fed has the tools to tighten monetary policy regardless the size of its balance sheet. Moreover, we have the will to do so in order to keep inflation in check. Turning first to the developments in financial markets, there is little doubt that we have seen a vast improvement over the past six months. The major equity indices have risen sharply, credit spreads have narrowed and bank equity prices have generally shown a substantial recovery. Many large financial and nonfinancial firms have found it relatively easy again to tap the debt and equity markets. The recovery in financial asset prices has been mirrored – albeit with a lag – in the economy. Industrial production has begun to rebound as the pace of inventory liquidation has slowed. Housing prices and activity have recovered somewhat – aided by the improvement in housing affordability and the first-time homebuyer tax credit. Fiscal stimulus is providing support to consumption and to state and local infrastructure spending. The vicious cycle we had a year ago – in which the deterioration in financial markets led to economic weakness and that weakness reinforced the tightening of financial conditions – has been broken.

In part for those reasons, a number of countries have over recent years developed indices of well-being, drawing on a much wider array of economic, social and environment factors. For example, in the UK the Office for National Statistics (ONS) has begun tracking 43 separate measures of well-being grouped into 10 categories: personal well-being, relationships, health, participation in civic society, where we live, personal finance, the economy, education and skills, governance and the natural environment. These different metrics are slightly apples and oranges – and some may be bananas. Nonetheless, a variety of empirical studies have found these categories to be important determinants of individuals’ subjective well-being. 12 A good starting point is personal well-being – people’s sense of whether their lives are satisfying. Chart 28 plots an index of personal wellbeing since 2012. At an aggregate level, it suggests a rising tide of well-being, consistent with a growing economy. There are also few clear distributional differences in this pattern of wellbeing, with different regions, ages and income groups all rising. Other measures of well-being paint a more mixed picture. Of the 43 measures of well-being tracked by the ONS, 17 have seen some improvement since 2012. Many of these improvements are among economic indicators – employment, income and wealth. In some ways more interesting, however, the majority of these well-being measures have not improved during the recovery, while a fifth have deteriorated. Interestingly, the areas of weakness chime with some of the messages I heard from charities in Nottingham last year.
Real convergence encompasses factors such as labor mobility, price and wage flexibility, exposure towards external shocks, industrial structures, and so on. Judged by these factors, convergence among future members of the EMU still has a long BIS Review 102/1997  -3-  way to go. This is important because to be successful a European monetary policy depends exactly on these factors. Without a high degree of real convergence, monetary policy is bound to have different effects in different parts of the monetary union. The very idea of a single European monetary policy would thus become unrealistic. The ECB would come under political pressure to accommodate mutually incompatible wishes from different parts of the monetary union. The result could only be a less than optimal monetary policy and rising inflation and interest rates. For EMU to be successful the member states of the EU should therefore make determined efforts to further real convergence. The convergence criteria as laid down in the Maastricht Treaty require member states of the EU to achieve certain goals by spring 1998. Convergence, properly understood, can however never be something that can be pinpointed to a certain point in time, but must be an ongoing process. It does not make sense to require countries to get their fiscal situation under control by a certain date, just to let them go unpunished on a public spending spree shortly afterwards. Prudent fiscal policies should not only be a requirement for becoming, but also for remaining part of the EMU.

So a certain degree of dispersion of economic parameters might be possible within an integrated economy which has the dimension of the United States, provided this dispersion has economic justification. Il Sole 24 Ore: Even accepting a period of deflation, with all the possible social consequences this might have? Trichet: Yes. We are an immense economy. It is normal that some regions, after growing above the EMU average for some time, and after having accumulated high national inflation, experience a correction and therefore a period of negative inflation, as it is currently happening in Ireland. Il Sole 24 Ore: The recent EU declaration regarding the Greece plan says that member states should push ahead toward a stronger economic governance. What are you expecting: a more coordinated approach or a transfer of competencies from the national to the supranational level? Trichet: As citizens we all have personal opinions on this matter. As a citizen, I would call myself when time comes and when people are ready to move towards an accomplished political federation. As of today our aim is to make the current institutional framework work as best as possible. We call for the full respect of the present Treaty. EMU is politically a bold endeavour: don’t forget that with regard to fiscal policies the Treaty allows the college of governments to impose decisions on other governments and parliaments. Implementing fully the Treaty and the Stability and Growth Pact calls for a much stronger governance in the future than what has been experienced in the past years.
The sustainability and continuity of effective policy management depends on the performance of public institutions that have sound policies and governance processes that are formalised in a clear, structured and well-defined framework. Equally important is the accountability. In this aspect, the institutionalisation of policies and processes, which culminates in sound governance serves to preserve good practices and imposes the necessary discipline for objective policy making. The gaps in the market infrastructure in the emerging economies however increase the vulnerability of our respective economies to external shocks. Such shocks have increased in frequency and magnitude, with the risk of prolonged implications on our economic growth. With its important role in the management of domestic macroeconomic and financial stability, Central Banks in this changing environment also need to be strengthened in order to enhance its effectiveness in facilitating conditions to support economic development. My remaining remarks this afternoon will focus on institutional building and economic development from the perspective of Central Banks in emerging economies. In particular, on the role of Central Banks in supporting the development agenda and as an institution building agent.

Taking into consideration even the impossibility of the European Central Bank to serve as liquidity provider to our countries, I would deem that the spaces available to us in the framework of current legal and regulatory aspect have already been exhausted (from the liquidity viewpoint). Otherwise, I would say we have reached a critical point, below which no space for action is left. Let me emphasise that now that the crisis highlighted many “vulnerabilities” of this rapid catching up, the analysis should go beyond just accepting it as valid. This becomes necessary if we take into consideration the designing of a different economic growth model. In this context, I am more and more convinced that the global crisis was a development that advanced in time the need for inevitable steering of many imbalances that our economies accumulated over the last 10-15 years. 2  BIS Review 146/2009
Ravi Menon: Asia – no room for complacency Keynote address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Paris Europlace Financial Forum, Singapore, 30 November 2011. *  *  *  Mr Christian Noyer, Governor of Banque de France, Distinguished guests, Ladies and gentlemen, Good morning. For those of you who are coming from abroad, a warm welcome to Singapore. Deleveraging out of a debt overhang Molière, a French playwright considered to be one of the greatest masters of comedy, once offered this sobering thought: “Debts are like children; begot with pleasure and brought forth in pain”. Today, the pain he described is palpitating throughout the world and keeping many leaders in government, business, and finance awake at night. The advanced economies are awash in debt. Governments, households, and banks must reduce leverage to restore economic and financial sustainability. But history tells us that deleveraging, while necessary, leads to a prolonged period of slower growth punctuated by increased financial market volatility. The gross government debt-to-GDP ratio is 80% in the UK and in the Eurozone, 100% in the United States, and 230% in Japan. Sovereign debt in aggregate is today at levels not seen since the Second World War. Financial markets, which had hitherto tolerated the build-up in debt, have turned merciless against the Eurozone economies, driving up sovereign spreads and dragging down the ratings of those who hold sovereign paper.

8  BIS Review 126/2010  Figure 6 Stock market volatility (percent)  Long-term interest rates in developed economies (3) (percent)  120  120  6  6  100  100  5  5  80  80  4  4  60  60  3  3  40  40  2  2  20  20  1  1  0  0  0  0  07  08  09  10  Developed markets (1) Emerging markets (2)  05  06 U.S.  07  08 Japan  09  10 Eurozone  (1) Uses VIX volatility index. (2) Estimated volatility of the MSCI index in dollars. (3) 10-year government bond interest rates. Sources: Bloomberg and Morgan Stanley Capital International. Figure 7 Output gaps (*) (percent)  6  6  4  4  2  2  0  0  -2  -2  -4  -4  -6  08  09 June 2010 Report  10  11  -6  September 2010 Report  (*) Gray area shows forecast as from the third quarter of 2010. Source: Central Bank of Chile.