samchain/econo-pairs-v1 huggingface dataset:
Lee Hsien Loong: Capital markets in the new economy  Speech by Mr Lee Hsien Loong, Chairman of the Board of Directors of The Monetary Authority of Singapore and Deputy Prime Minister, at the 25th Anniversary Celebration Dinner of the Singapore Investment Banking Association, held in Singapore, on 6 September 2000. *  *  *  Chairman, SIBA, Mr Koh Kah Yeok, distinguished guests, ladies and gentlemen, Introduction I am happy to celebrate with the Singapore Investment Banking Association (SIBA) your 25th anniversary. For many years, SIBA has actively provided industry feedback on government policies, especially on capital market regulations and developments. These inputs have helped MAS to create a conducive environment for all financial players. Last November, your association broadened its charter, reconstituted itself to include a wider spectrum of activities and financial institutions, and changed its name to SIBA. This was a timely move. I am pleased to note that you have formed the SIBA Debt Capital Market Committee. As an MAS survey1 shows, corporate debt issuance more than doubled last year to $ 19.5 billion. In the first half of this year, corporate debt issuance is already $ 21.2 billion, exceeding the volume for the whole of last year. More diverse issuers are tapping the debt market, and interest from local investors has grown. An industry body to champion the development of the debt market, and institutionalise a feedback channel to MAS, will therefore play a useful role. Global trends in capital markets In the financial industry, globalisation is proceeding apace.

This prediction did not materialise in full. During the second half of the year it seemed clear that there would be some lag between the depreciation and its effect on the price level. This prompts questions about the correlation between prices and exchange rate developments. The short-term relationship of these factors appears to have weakened, which is undoubtedly explained in part by market competition. A more flexible exchange rate policy is also unquestionably at work. In earlier times, when devaluations were made amid extensive announcements, the change was in general rapidly reflected in the price level, since it was fairly certain that it would be permanent. After the exchange rate was made more flexible, it can be assumed that uncertainty about the permanence of changes has led buyers and sellers of goods to take more short-term exchange rate risk than before,  2  BIS Review 27/2001  since high costs are involved in making frequent alterations to prices. However, it is imprudent to ignore the eventual impact of a depreciation on prices, since research offers no support for such a view. This is one of the assumptions on which the Bank bases its forecast from this February, where inflation is expected to run at 4.3% between 2000 and 2001 and 4.6% from the beginning to the end of the year. Next year it is forecast to slow down to 2.7% from the beginning to the end of the year.
In the wake of the controversy surrounding the intelligence community's assessment of the existence of weapons of mass destruction in Iraq, IARPA set out to enhance the accuracy, precision, and timeliness of intelligence forecasts.3 The Federal Reserve and the broader economics and financial community have, of course, had to face similarly humbling shortcomings in our failure to forecast the Great Recession, despite the numerous signals that were available to forecasters and policymakers prior to 2008. On this issue, it is useful to recall a quote from an unusual source on economic forecasting, the Queen of the United Kingdom, who in November 2008 asked, "Why did nobody notice it?" We should not treat this as a rhetorical question. What are some of the underlying reasons individuals and organizations fail to predict? What should we change about our mindsets and practices to improve the chances that we "notice it" next time, whenever that may be? At the New York Fed, we've made investments in response to these critical questions. We've created a team that is raising awareness of the challenges that make it so difficult to "notice," innovating on how we approach analysis and decision-making, and making these approaches an essential part of what it means to work at the Bank. This is much in the spirit of what IARPA sought to do by sponsoring their tournament. To compete in the IARPA tournament, Tetlock recruited participants online from outside the intelligence community.

At the same time, the monetary policy stance of the ECB, while fully oriented towards the price stability objective, does influence the exchange rate. From a theoretical viewpoint, one can argue that the member countries of the euro area have chosen to go beyond a fixed exchange rate by adopting a single currency. The adoption of the euro implies the irreversible abolition of national currencies and, hence, of national exchange rates themselves. This choice involves a trade-off. On one hand, a single currency, as we have seen, eliminates the volatility of exchange rates within the monetary union. The euro, as a freely-floating currency, helps protect the economies of its member countries from external shocks. The single currency also facilitates trade between them, deepening economic integration. However, the elimination of national currencies implies that market signals regarding domestic economic imbalances are lost, allowing such imbalances to build up. More importantly, the absence of national currencies also implies that a valuable tool for stabilising the economy in the short term in the face of asymmetric shocks is no longer available. The sovereign debt crisis in the euro area has brought home the implications, both positive and negative, of membership of a single currency area. It remains my firm opinion, however, that the gains outweigh the losses. It is also my firm opinion that greater efforts need to be made to reduce and eventually eliminate internal imbalances within the monetary union in order to protect its sustainability.
Future wage formation is yet another risk factor that the Riksbank has to consider. There are some encouraging signs that wage formation is moving in the right direction, even though the parties have gone in for a certain amount of bidding. This tends to be a process that conveys a varying degree of realism. It is important to bear in mind that wage formation is not just a matter of the level of wage agreements. The outcome for wages is also conditioned by the wage drift that mirrors labour supply and demand. The less efficiently the labour market works, the sooner bottlenecks arise that generate increased wage drift. Tendencies to labour shortages in certain sectors are already discernible, despite the high unemployment. Conclusion: monetary stance well balanced; changes in the spectrum of risks A monetary policy that aims for sustained price stability is not at odds with good economic growth. This presupposes that the supply side functions so well that growth does not give rise to inflationary impulses. But if the structure of the economy is such that only moderate growth is feasible, demand and accordingly the monetary stance must be adjusted accordingly. The alternative is demand growth that exceeds what the economy is capable of producing without inflationary bottlenecks. Accelerating inflation is a threat to sustainable growth and may even result in serious economic setbacks, as history has taught us.

I am therefore delighted that the Institute of Directors has chosen this topic for discussion today. Perhaps it would be useful to begin by defining what corporate governance means. There is no single, accepted definition of what “corporate governance” means. The majority of the definitions employed by corporate practitioners relate corporate governance to “control” of the company. In this regard, corporate governance is defined as a set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance influences how the objectives of the company are set and achieved, how risk is monitored and assessed and how performance is optimised. Ladies and Gentlemen, corporate governance is of key importance to any financial system. In Zambia the financial sector is dominated by banks and these remain the main source of finance in the economy. The failure of corporate governance in banks may therefore pose serious consequences for the banking sector and the economy as a whole. It is also important to note that the health of the financial system largely depends on their capacity to identify measure, monitor and control their risks. Banks face a wide range of complex risks in their day to day operations, including risks relating to credit, liquidity, exposure concentration, market risks, settlement, and internal operations. The nature of banks’ business particularly the maturity mismatch between their assets and liabilities, their relatively high gearing and their reliance on creditor confidence creates particular vulnerabilities.
By then the Central Bank had repeatedly stated that the exchange rate of the króna had become much weaker than warranted by economic fundamentals. The impact of the tight monetary stance was increasingly felt as the year 2001 wore on. The sharp turnaround in the exchange rate at the end of November that year and the agreement between the Federation of Icelandic Labour and Confederation of Employees in December 2001, postponing an inflation-triggered review of wage agreements, eased the uncertainty and changed expectations. Both these events led to a rapid drop in inflation in 2002, and by last November the Central Bank’s inflation target was attained, one year before this was envisaged in the joint declaration by the government and the Central Bank from March 2001. When it became clear that inflation was on a significant downward path, the Central Bank gradually began to lower its interest rates. It also announced that it aimed to cut them in more and smaller steps rather than fewer and larger ones, not least with the idea of maintaining calm in the forex market. Since April last year the Central Bank has lowered its interest rates eleven times by a total of 4.8 percentage points, including the cut announced on February 10. The Central Bank’s rate for its repo agreements with credit institutions is now lower than it has ever been since the current arrangements for such transactions were introduced early in 1998, when it was 7.2%, and in fact is at its lowest level since 1994.

Besides inflation forecasting, the Central Bank publishes a quarterly assessment of the economic and monetary situation and prospects, including a national economic forecast, and their probable impact  BIS Review 8/2003  1  on price developments. If inflation is heading beyond the Bank’s target on a longer-term scenario, the Bank raises its policy interest rate, but cuts it if inflation is heading below the target. In preparing its inflation forecasts and regular assessments of the economic situation and prospects, the Central Bank examines a wide range of indicators. These are both statistical data and information obtained from interviews with representatives of industry, organisations with vested interests, credit institutions and others. The Bank publishes the bulk of its statistical indicators and data on its website. Central Bank decisions are made after in-depth examinations of indicators about economic developments, its assessment of the situation and outlook, the assumptions behind the inflation forecast and the inflation forecast itself. Under the Central Bank Act, the Bank’s Board of Governors have set internal rules on the preparations of, arguments for and presentation of its monetary policy decisions. These rules were formally set in the beginning of 2002 and published in the quarterly Monetary Bulletin. Having said this, it is tempting to try to assess the success of monetary policy implementation after the framework was changed and the new Central Bank Act went into effect in spring 2001.
The Island has been suffering from a vicious cycle. As employment declines, people move to the mainland to find jobs. Accordingly, economic activity and tax revenues decline, forcing the government to raise taxes and cut spending, which further reduces employment and prompts still more residents to move. At this point, the outlook for anyone who has been living here must be bleak, and it may be hard to imagine this situation turning around anytime soon. And yet, history tells us that a turnaround, though not inevitable, is indeed achievable. Lessons from past crises New York City is probably the most famous example of a municipality that experienced a major fiscal crisis, recovered and is now thriving. New York City’s experience is viewed, in retrospect, as a major success, and some, including myself, have pointed to it as a hopeful example of what 1/4  BIS central bankers' speeches  could come to pass in Puerto Rico. But, there are important caveats to the New York City story and its applicability to the Commonwealth. Like Puerto Rico, New York City experienced a number of years of both political and economic pain as a result of its fiscal crisis in the 1970s. On the political side, New York City residents lost a large measure of their ability to chart their own fiscal direction for several years. Decisions about tax and spending policies were removed from elected city officials.

It is also important to think hard about the supply of labor—the willingness of people to work, and the education and skills that they have to bring to the market. Labor supply is equally important, but less widely discussed than the demand side of the market. Labor force participation is lower at all ages in Puerto Rico than on the mainland. This is a crucial impediment to growth, and addressing it 3/4  BIS central bankers' speeches  requires innovative policy options. One idea to address this problem would be to extend the Earned Income Tax Credit to Puerto Rico. In addition, the structure of the Commonwealth’s tax system creates disincentives to work in the formal sector, and suggests that tax reform could produce a growth dividend as well as a more reliable source of revenue. On top of the low labor force participation is the well known and deeply concerning high level of out-migration. In addition to the lack of labor demand, it seems likely that quality-of-life concerns such as high crime rates are playing a role in these decisions. This underscores the importance of basic public service delivery and is another example of the interplay between fiscal and economic outcomes. Another important dimension of labor supply involves the skills that workers bring to the market. Many of these skills are acquired while in school. Our research indicates that test scores for school-age children on the Island are low, suggesting that there is an opportunity for improvement in the quality of public education.
French banks do not have so called “toxic assets” in their balance sheets but sovereign exposures on countries which are part of a monetary union. Some of these exposures need to be provisioned. These provisions will be increased for Greece. And all these risks are fully disclosed according to the European Banking Authority (EBA) templates. Despite the deleveraging taking place, their profitability remain strong and will enable them to face, in due time, the increase of capital requested by the new regulatory environment. I would therefore emphasize that these so-called “vulnerabilities” are mainly the consequence of the internationalization of banking activities. And there is a certain paradox in a situation where these globalized banks, with diversified activities and balanced business models, are perceived riskier than more specialized institutions. **** To conclude: in these turbulent times, Europe has a special responsibility. Currently, at the epicenter of the crisis we are fully aware of the necessity to take and implement vigorous decisions. However the interaction between markets and governments has become more complex. We live in democracies and have to accept that political decisions follow their own process and obey their own constraints. In all our countries, rising public debt and the unstable state of public finances is creating enormous anxiety, which, in turn, makes it more difficult to reach the necessary decisions. There are, however, some reasons for optimism. On the supply side, our economies remain robust and dynamic. Corporate balance sheets are strong.

The same holds true for public debt, which amounts to 85% in the euro area while it will soon cross the 100% mark in the US. Many Countries are improving their fundamentals. The primary deficit of Spain for 2011 will be around 4.7%, half that of the US and the UK. Italy will be one of the very few advanced economies to have a primary surplus, around 0.5%. The IMF has recently acknowledged, and even praized, these efforts and commitments. In short, if good fundamentals are an absolute necessity, it is not a sufficient condition. Now can we let liquidity spirals lock a country, just like a financial institution, into a bad equilibrium? We faced that question in 2009 when dealing with financial institutions. We are now facing the same question regarding sovereign risk. Our answer is twofold. First, get the fundamentals right. For European countries, it means reverting to a sustainable fiscal position which requires a significant primary surplus. And second, there is a need for a liquidity backstop to ensure that bad equilibria will not develop. Where that backstop is coming from is a key question. Unconventional monetary policies have led many central banks to purchase significant amounts of Government debt: those purchases amount to 51% of the total debt issued since 2009 in the UK, 21% in the US versus 7.5% in the euro area – where they were fully sterilized. These policy stances have contributed to giving markets an insurance against a potential dry-up in liquidity.
However, it is often the case that a rapid fall in a credit and debt cycle entails a corresponding fall in the normal economic cycle – and not uncommonly a balance-sheet recession.6 Monitoring the credit and debt cycle thus becomes a way of stabilising the normal economic cycle. With this view, it is less obvious that financial stability policy and monetary policy should be conducted separately. But, once again, it is probably quite rare that there will be reasons to coordinate them. The policy rate will probably need to support financial stability policy With regard to the question of the role of the policy rate in financial stability policy, it is my personal opinion that one must always be prepared to use it to slow down an excessive expansion in credit, or to “lean against the wind” as it is usually called. Hopefully, it will be possible to find a set of macroprudential tools that are efficient enough so we do not need to use the policy rate for this purpose. Hopefully it will also be possible to find appropriate forms as to when they shall be used and by whom. But my feeling is that even when we have a proper framework for macroprudential supervision, situations may arise where support is needed from monetary policy “leaning against the wind”. One reason is that experience shows that it is difficult to construct regulations that can never be circumvented. The policy rate is a blunt instrument, as it has a broad impact on the economy.

Soifua ma ia manuia. 2  BIS central bankers’ speeches
I must hasten to mention, however, that in striving to meet these demands, banks must always comply with the regulations as stipulated in the Banking & Financial Services Act of 1994 as amended in 2000, to ensure the safety of customers’ deposits and stability in the financial sector. Any activities by banks, which do not meet the minimum standards provided for in the law, will invite close scrutiny and possible sanctions from the Bank of Zambia to bring the banks in line with the legal framework. Mr Chairman, following implementation of sound macroeconomic policies, the economy is relatively stable as shown by various indicators: •  Inflation is under control;  •  The Kwacha is stable; and  •  Interest rates are going down, although not yet as low as we would like them to be. The cost of borrowing has remained high in spite of the progress that has been made in the monetary and fiscal management of our economy. This high cost has, in turn, stifled the growth of the productive private sector, in particular the Small and Medium Enterprises (SME) sector, which should be the engine of economic growth of our country.

Data on developments in foreign trade of economy reveal a contracted trade exchange in the first five months of 2012. Value of exports marked a low annual growth of 1.3% in this period, reflecting the moderation of foreign demand and price developments in global markets. In this period, imports shrank by 2.0% in annual terms. These developments resulted to a decreased trade deficit in the first five months of the year by the annualised rate of 4.2%. Developments in foreign trade were determined mostly by electrical energy trade exchanges in this period. Excluding this effect, the growth in exports would be higher and the contraction in imports deeper, resulting in a contracted trade deficit, at 18.1%. The performance of monetary indicators was in line with the developments in the real economy and our analysis show contained monetary pressures on inflation. The annual growth of M3 was 8.7% in May, maintaining the average rates of the previous month of the current year. The growth paces of money supply slowed down compared to a year earlier, reflecting the lower demand of economic agents for money. The consolidated fiscal position  2  BIS central bankers’ speeches  was coupled with a decrease of public sector borrowing, whereas private agents of economy reflected a low demand for financing. Lending to the private sector rose by 7.5% in May, pursuing the slowing trend, which has started since the end of previous year.