samchain/econo-pairs-v1 huggingface dataset:
We insist that remuneration is structured to ensure that individuals have skin in the game, namely that a meaningful amount of past remuneration is  BIS central bankers’ speeches  1  retained or deferred and for senior people is at risk should problems then emerge. We require that risk management and internal audit in firms are effective and act to root out poor incentives and weak controls. All of this is important and central to what we do as regulators, but let me reinforce the point that culture begins and lives, and I am afraid dies, at home, with firms. It is not for us as regulators to prescribe culture, that would not work. Firms and their management have to want good culture. But we can have a lot of influence here. In the last few months we have taken a very important step here by introducing for banks the Senior Managers and Certification Regime, as proposed by the Parliamentary Commission on Banking Standards. It replaces the Approved Persons Regime, and in time it will be implemented across the regulated financial services sector. There is, let me be clear, no magic bullet to change culture, but the new regime is a big step forward in my view. This is because at its heart it embeds the notion of personal responsibility for the affairs of the firm at the level of senior management. The Approved Persons Regime did not do this, and in practice it focused on a notion of culpability not responsibility.

Over the next two days I look forward to meeting with your elected officials in Newark, visiting Newark Now, sitting down with the Episcopal Community Development Housing Counselors, as well as meeting with New Jersey community bankers and credit union officials, visiting the manufacturer Accurate Box, touring Jersey City and learning more about the pharmaceutical industry – my staff has booked a packed schedule. The role of the New York fed By way of introduction, let me briefly review what the New York Fed does and what makes my job so interesting. As always, what I have to say reflects my own views and not necessarily those of the Federal Reserve System or the Federal Open Market Committee, also known as the FOMC. I am vice chair of the committee and we meet eight times a year in Washington, D.C., to set interest rates and make other decisions about monetary policy. At every meeting of the FOMC, each committee member presents his or her current outlook for their region and for the overall economy. For these assessments, we augment input from our research departments with critical information about local economic conditions supplied by our board of directors, regional advisory councils and conversations with local stakeholders, such as the feedback I will get from you today. At the regional level, we continually track economic conditions in our District, and we have created a number of tools for this purpose.
A more expansionary monetary policy At the start of 2015, we thus found ourselves in an unusual situation with a series of circumstances that suggested that monetary policy needed to be more expansionary: declining confidence in the inflation target, the measures adopted by the ECB to weaken the euro, the risk that the falling oil price would put further pressure on inflation expectations and increased uncertainty over international developments. Consequently, there was a need to strengthen confidence in the inflation target through clear signals of the Riksbank’s ability and willingness to bring inflation back to the two per cent target in a controlled form. We needed to clarify and practically demonstrate that monetary policy had more to give. The repo rate was already at a historically-low zero per cent and even the interest rates we sometimes call the final interest rates – that is, those actually paid by households and companies – were at historically low levels. But interest rates needed to be even lower and we needed to counteract the increasingly rapid appreciation of the krona. Negative interest rate? The most obvious measure was to cut the repo rate further, that is to make it negative – to introduce what, in everyday parlance, was starting to be called a negative interest rate. When we cut the repo rate to zero per cent, we did not observe any major problems.

As the world economy began feeling the brunt of the global financial crisis with the fall of Lehman Brothers in September 2008, public discourse in most countries called for a rapid and decisive policy response. In an unprecedented move, finance ministers from many OECD and emerging countries announced important fiscal packages in an attempt to revive the world economy. Chile was no exception, where the government implemented a fiscal expansion over 2% of GDP – in relative terms, among the largest in the world. Central banks, for their part, also implemented large monetary expansion measures to stimulate the struggling economy, first by lowering interest rates to their effective lower bound, and then, in many cases, by taking additional steps aimed at providing liquidity to seized financial markets. This was also the case of Chile, where we reduced interest rates to its lowest historical level, and then increase its expansionary stance by implementing nonconventional measures. This is a fundamental factor in Chile’s current strong recovery. The present challenge is the withdrawal of the monetary stimulus at an appropriate pace, which insures that inflation forecast is consistent with our target of three percent in a two year horizon. We are taking into account the different factors affecting the outlook, such as the behavior of the exchange rate, the strength of the expansion of demand and activity, and the perspectives of lower interest rates in the world, among others.
We still seem to be going through the same arguments, the same structural issues. In fact if anything a potential new government in Italy could scrap some of the reforms that the ECB so applauded. Certainly the advice we are giving to governments, insofar we can give advice to governments, because they are independent from us as much as we are independent from them. The only advice we can give is to use that environment of strong growth, of lower rates to build the buffers in the economy. That includes building fiscal buffers but that also includes doing structural reforms so that the economy can become stronger. Listening to some of the more recent speeches from Mr Draghi and hearing comments from yourself and others, I don't get the impression that the ECB feels that their opportunity has been taken. Am I wrong? There has been some disappointment on the fiscal side where we believe that governments generally could have made better use of the windfall of lower rates to reduce their deficits, to consolidate their finances in a more permanent way, in a more structural way. That's true. Now, when it comes to reforms in the real economy we've seen a lot going on. Look at how much Spain has reformed its labour market. That's now yielding very positive results in terms of job creation. Look at what France is doing, which really goes in the right direction, so reforms are being done. Are they being done in Italy?

We are very much data driven; we are driven by facts. We'll look at how all kinds of circumstances, including trade but also the global economy generally and the momentum we have in Europe, feeds into eurozone inflation and that will be the basis for our decisions. So far we are coming from a starting point which is strong and where we have increasing confidence that our inflation objective will be met. When I look at some of the wage deals going around at the moment in Germany and beyond, I see very healthy wage growth of some of those deals as well. When's that going to start feeding through into broader inflation, the kind of figures you want to see to be able to feel more comfortable about raising rates to a normalised level? We've seen some uptick in inflation even in the most recent numbers. It is slow, because we are starting from a point where unemployment at eurozone level was high and broad. We know that it takes time for it to translate into wage pressures. We have to be patient, but there is no reason to think that this will not translate into higher price and wage pressures. We've started to see it. In terms of the cover you've given countries like Italy and others as well, do you feel they've squandered that cover that the ECB has given and the support the ECB has given them through a lower yield and lower borrowing cost?
While still low by historic standards, it is 100 basis points above its previous level. And we must add to this rise in the Treasury bond rate the increase in the foreign credit premiums facing the emerging economies. Emerging markets’ currencies have depreciated substantially against the US dollar, and their market capitalization is lagging behind the advanced economies’ stock markets. The external financial conditions facing our economies are entering a normalization stage, but they are still favorable from a historic perspective. In short, after six years since the outbreak of the global financial crisis, international conditions are returning to normal. This scenario implies that most Latin American countries, including Chile, will be getting a weaker impulse from abroad at least in the short run, due to  BIS central bankers’ speeches  1  the drop in the terms of trade and the more stringent external credit standards. Still, over the medium term, a recovery of developed economies’ growth is certainly good news. And much more so, if we consider that a persistent “easy money” era may create economic and financial imbalances which, the longer they last the higher the price that has to be paid in terms of economic and balance sheet adjustments down the road. The question is, where do the emerging economies stand to deal with this transition? There is no simple answer to this. Some have used the boom years to consolidate their fiscal accounts, balance sheets and macroeconomic policies.

There has been a limited pass-through of the peso depreciation in to final prices, but no spillovers in medium-term inflation expectations or nominal wages. Given the recent slowdown of output, we expect some increase in the amount of slack in the  BIS central bankers’ speeches  3  economy that should help to contain second round effects of this transitory inflation shock but we remain vigilant. Monetary policy has turned toward a more expansionary instance. The monetary policy rate (MPR) has been lowered by 100 basis points in recent months to 4%, and the Bank has pointed out in its latest communication that it will assess the possibility of introducing additional cuts according to the evolution of domestic and external macroeconomic conditions and their implications for the inflation outlook. This response of the Chilean economy to the changes in terms of trade and external financial conditions accurately reflects the operation of our policy regime. Over the years, the Central Bank has shown its commitment to take action to safeguard price stability. We have been consistent over time and we have built a credibility record that gives us room to use monetary policy in a counter-cyclical fashion when it is advisable. Our policy framework allows for timely adjustments of the real exchange rate and the interest rate, which provide the right signals to keep the domestic economy growing around potential, smooth the adjustment of the capital account, while inflation and inflationary expectations remains anchored. This makes a difference with our economic history.
But it was now nevertheless clear that it was a total renovation that was needed. 4 [16]  In the Swedish paper Dagens Nyheter on 20 November – the day after the defence of the fixed exchange rate was abandoned – it was announced that an expert group had been appointed with Professor Assar Lindbeck as chairman. The aim was to tackle the long-term economic problems and, in Assar's words, to try to answer the question: “What is it about the Swedish economy that makes it run out of control like this?”6 The group, which came to be called the Lindbeck Commission, was to present proposals for how to tackle problems, which Assar described as “the low growth rate, the exploding public expenditure, the budget deficits, the constant trends towards cost inflation and the slow productivity growth”. Necessary changes in the framework… Unfortunately, it often seems that a crisis is needed to bring about real and profound changes. The major changes in the economic policy frameworks that we made as a result of the crisis in the early 1990s are well known so I will only mention them briefly here. The inflation target Instead of defending a fixed exchange rate, the task of monetary policy from now on would be to keep inflation low and stable. In January 1993, the Riksbank announced that an inflation target of 2 per cent would enter into force with effect from 1 January 1995. Gradually, changes in the monetary policy framework confirmed the new order.

The inflation target and the Industrial Agreement together contributed to this development. This underlines the importance of the inflation target as a nominal anchor for the Swedish economy. 6 [16]  Diagram 3. Swedish real wages from 1970 Index, 1970 =100  Note. The broken line marks 1995, the year when the inflation target entered into force. Sources: The National Mediation Office and Statistics Sweden  Thirdly, the fiscal policy framework has contributed to the successful consolidation of Swedish public finances and these are now in a very good state. This has increased market confidence in Sweden's ability to keep its public finances in order. The difference between Swedish long-term market rates and those in other countries can be seen as a measure of this and of confidence in the Swedish economy as a whole. At the beginning of the 1990s, the long market rate in Sweden was quite a lot higher than the European and American rates. Confidence in the Swedish economy was low and most people believed that the rate of inflation would remain high. During the thirty years that have passed, the interest rate differential has shrunk and for quite some time the long-term interest rate in Sweden is at roughly the same level as in Germany. 7 [16]  Diagram 4. Government debt and interest differential Central government debt as a percentage of GDP and interest differential on 10-year government bond yields  Note. Share of GDP and percentage points difference.
But interconnections could switch from friend to foe when shocks were large. Connectivity then amplified, rather than dispersed, risk; it spread contagion. The more connected the system’s nodes – the larger the number of “super-spreaders” - the greater this fragility. This “robust-yet-fragile” property of complex webs struck a cautionary note about the true stability of modern finance.19  When it came to managing systemic risk, complexity science was rich in answers too. In avoiding fragility, one effective solution was to ring-fence activities, the financial equivalent of fire-breaks, to contain contagion. A second solution was to focus on inoculating, or risk-proofing, the super-spreaders to prevent them serving as a conduit for contagion. And a third was to manage emergent aggregate risks to the system by explicitly leaning against the risk cycle, moderating its emerging excesses. I am still waiting for comments on my 2005 memo. With hindsight, one of my career regrets was not to make more of the results until it was too late. This framework did, nonetheless, prove useful after the global financial system went into meltdown in 2008. The robust-yet-fragile property of modern finance was then laid bare. The double-edged sword of financial integration did then cut through the financial system. And super-spreaders did suddenly appear on our high streets, as people queued in the streets for their money. None of this is to suggest that me or anyone else foresaw the true horror of the Global Financial Crisis.

Risk had been dispersed and diversified to the four winds, courtesy of an ever-more interconnected global financial system and ever-more sophisticated financial instruments.17 The Great Moderation in the economy also meant finance faced fewer shocks than in the past. 13  Haldane and Kruger (2001). Fischer (1999). 15 Evanoff et al (2015). 16 Taylor and Schularick (2012). 17 Greenspan (2002). 14  11  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  11  When it came to assessing risks to the financial system, unlike with monetary policy, there was no off-the-shelf model. In pursuit of one, I started looking to other disciplines for inspiration. From the mid-2000s, I began discussion with a set of scientists – physicists, evolutionary biologists, epidemiologists – on the models they used to understand complex, adaptive systems. I was hoping they might provide some analytical clues when it came to modelling the complex, adaptive world of finance. I was in luck. There was a well-developed field of complexity science, with applications in most of the natural sciences and some of the social sciences. Economics and finance was a notable exception. Once I had retro-fitted these models to the financial system, I wrote a note and sent it to the Governors in 2005. It was titled “Public Policy in an Era of Super-Systemic Risk”. It made some bold claims about financial system resilience, most of which jarred with the prevailing orthodoxy.18  Financial integration, it argued, was a double-edged sword. It was fantastic for risk-dispersal when the good times rolled.
At the same time, it should be stressed that regulation and surveillance of financial institutions are the first line of defence against shocks to the financial system. And in the years following the financial crisis, the regulatory framework has been strengthened. But that does not mean that our work is done. The financial system is in constant flux. Economic agents in search of yield will seek out new opportunities. Today’s regulations are not necessarily well suited to meet tomorrow’s challenges. We still need more knowledge about the use of macroprudential tools. The prospect of a persistently low neutral interest rate has made this work even more important. CONCLUSION Let me conclude by noting that in spite of the demanding task monetary policy has faced globally in the aftermath of the Great Financial Crisis, it is difficult to see alternative strategies to today’s flexible inflation targeting framework. The framework did not hinder a powerful response when the financial crisis erupted. Inflation expectations were firmly anchored. This enabled central banks to reduce the amplitude and length of the downturn. In Norway, the monetary policy regime also functioned effectively in the face of the sharp fall in oil prices. A lower neutral interest rate level has complicated, but not prevented, monetary policy from fulfilling its role as the first line of defence in countering cyclical fluctuations in the economy. Recent years have also shown that central bank toolkits can contain more than policy rates.

Throughout Malaysia’s more than 50 years of development, the country has demonstrated economic flexibility to successfully shift to the new areas of comparative advantage to the new areas of growth. I believe, with the foundations in place, Malaysia has every potential to transition into a high value-added, high income economy. Concluding remarks Asia’s new role in the globalisation process has only just begun. The continuous dynamic evolution of Asia as greater regional economic and financial integration take place will contribute towards raising the standards of living in this region. In this context, the important partnership between the Government and the private sector remains a key element in ensuring stability and sustainable economic development in the future. 4  BIS Review 43/2010
And the ZLB often comes hand in hand with undesirably low inflation or even a falling price level, carrying with it the associated costs of debt deflation on the real economy. The risk of too-high inflation What about the other risk to our policy goals that I mentioned – the risk that the U.S. economy could face pricing pressures that accelerate rapidly and ultimately leave inflation far above our 2 percent target for an unacceptably long period? At some point when the economy has clearly overcome the remaining impediments from the largest economic and financial downturn since the Great Depression, the odds of inflation  BIS central bankers’ speeches  7  rising noticeably above target could become palpable. But such a breakout is just not at all very likely today. Indeed, many Fed critics have been voicing this concern since 2009, and it hasn’t even come close to happening. What if inflation just ran moderately above target for some time? Well, I see the costs of this outcome as clearly being much smaller than the costs of falling back into the ZLB. First, I believe the U.S. economy could weather the modest increases in interest rates that would be needed to keep inflation in check. Such rate increases would be manageable for the real economy; this is particularly true if industry and labor markets have already made the most difficult reallocations of jobs and overcome other factors so that productive resources are more efficiently and fully employed.

In this scenario, the FOMC could misjudge the presence and magnitude of economic impediments and misread the recent progress we have made as evidence of sounder economic trends. If we were to presume prematurely that the U.S. economy has returned to a more business-as-usual position and reduce monetary accommodation too soon, we could find ourselves in the very uncomfortable position of falling back into the ZLB environment. Such an outcome could be a serious setback to the timely attainment of our dual mandate policy objectives. This risk consideration means that the decision to lift the funds rate from zero should be made only when we have a great deal of confidence that growth has enough momentum to reach full employment and that inflation will return to a sustainable 2 percent rate. We should also proceed cautiously and keep the path of rate increases relatively shallow for some time after we begin to raise rates. This approach will allow us time to assess how the economy is performing under less accommodative financial conditions and reduce the odds of overaggressive rate hikes choking off progress toward our policy goals. History Shows That Premature Exit Is a Risk  15  See National Association for Business Economics (2014a). 16  See, for example, Kocherlakota (2013). 6  BIS central bankers’ speeches  Great depression Past experience with the ZLB also counsels patience. History has not looked kindly on attempts to prematurely remove monetary accommodation from economies that are in or near a liquidity trap.