samchain/econo-pairs-v1 huggingface dataset:
Role of the financial system in supporting green technology The financial system has played an important role over the last few decades, in facilitating the economic transformation and growth of the real economy, by channelling investments into productive sectors. This role has been significantly fortified by a strong and well-capitalised financial system in Malaysia, that has been built through comprehensive reforms undertaken over the last decade. Our financial system today is characterised by solid financials, and strengthened risk management and governance practices. Combined with ample liquidity and improved credit infrastructures, the financial system is well-positioned to support new areas of growth that are viable and promising, including those in the green technology sector. To meet the needs of the green technology sector, I would like to highlight two points that might reduce the information asymmetry between financial institutions and businesses, a pre-requisite for building a sustainable financing ecosystem for this sector. Firstly, financial institutions must have the capacity and capabilities, to assess the viability of projects despite the complex, diverse and rapidly-changing nature of green technology. Secondly, green businesses need continuing advisory support as they may be technically strong, but lack the capabilities to develop comprehensive business plans and cash flow projections, needed to demonstrate that a project is viable to financiers.

Therefore, monetary policy in catching-up countries – unlike that in advanced economies – must also foresee and take into account price convergence patterns in the long run and this is a challenge that still lies ahead of us. The years that passed since the adoption of inflation targeting in Romania were quite out of the ordinary. Until 2008, we had witnessed an economic boom and widening macroeconomic imbalances amid large capital inflows, only to move towards the subsequent bust in 2009 following the outbreak of the global crisis, with the plethora of problems related to correcting domestic and external imbalances. Over the last years, our economy has come a long way, and is now better prepared to deal with external shocks than it was at the beginning of the crisis. It seems that the “light” version of inflation targeting has been working fairly well for a catching-up economy as Romania, providing a combination of rules and flexibility to overcome such trying times. Of course, a coherent macroeconomic policy mix is needed to maintain the economy on an upward course without putting at risk the hard-regained balances. In general, irrespective of how well-designed the monetary policy may be, in the absence of adequate complementary policies, it is likely to achieve sub-optimal outcomes. I would like to end by trying to answer, based on my experience as a central banker, two simple questions related to inflation and real convergence that concern not only Romania, but also other catching-up economies.
9  The Bank of England’s June 2000 Financial Stability Report highlighted the risks to the financial sector of the heavy debts taken on by telecoms firms to finance purchases of licences. BIS Review 134/2009  7  Second, and again anticipating part of my later remarks, the residents of industrialised countries are free to borrow from abroad, so total credit growth may lie beyond the control of national authorities. There is no good reason to turn our backs on free flowing capital. Third, a “dynamic resilience” objective would not leave credit conditions untouched. “Dynamic resilience of the domestic banking sector” should, by contrast, be something national authorities can influence. A required increase in banks’ capital resources or liquidity during a period of exuberance would be likely to act, in degree, as a circuit-breaker on domestic credit supply. So there would be an effect on credit conditions, and so plausibly some indirect taming of the credit cycle during the upswing. And, crucially, during the subsequent downswing, the macro-prudential dial could be relaxed where necessary to lean against the risks of a perverse downward spiral. A broadly symmetric approach would be important. Its feasibility would depend on there being appropriate minimum capital requirements in the first place for normal conditions. That is part of the Basel agenda. So, on this view, the mandate or mission could be expressed in terms of ameliorating the impairment of banking system resilience that typically occurs during credit booms.

5 Third, some of the assumptions on which financial activity has been predicated turn out to be (or are seen as being) invalidated; eg, in the current  5  Ingves S, “A Cure for Crises: Confidence, Confidence and Trust”, a speech at the Eurofi Forum, Gottenburg, September 2009. Akerlof, George A, 1970 “The market for ‘Lemons’ Quality Uncertainty and the Market Mechanism”, The Quarterly Journal of Economics, MIT Press, vol 84 (3), pp 488-500, August. BIS Review 134/2009  5  crisis, the reliability of ratings of ABS. Fourth, the demand for liquidity rises, and its supply falls back. Markets become less liquid. Rising liquidity premia and forced sales depress asset values. Credit supply is reined in. A vicious circle is threatened by the excess leverage and liquidity mismatch that have developed in the financial system during the upswing. During that upswing, important contributory factors will typically have included illusions about risk-adjusted returns; underestimating the extent to which buoyant conditions are being driven by falling liquidity premia; and a sense that, if the bubble bursts, the central bank will somehow be able to contain the spillovers. This amounts to “risk illusion”, which should probably be as much debated as “money illusion” is in monetary economics. Separately, there is a potent collective action problem in getting off the dance floor. Not a few senior market participants felt from at least 2006 that financial risk was underpriced, and that conditions in, for example, the leveraged loan market were silly.
Independent pursuit of an inflation target does not mean that monetary policy is uncorrelated with other macro policies, including fiscal policy. Indeed in the current circumstances there are mutually reinforcing effects from monetary and fiscal expansions. The consistency of the response of monetary and fiscal policy is something that the IMF has emphasised and recognised in its assessment of UK policy. But that does not mean independence has been abandoned. The interventions we have made are effective because the Bank is independent, and because we will reverse these actions when conditions require that. A fallacy of so-called Modern Monetary Theory is that it believes monetary policy can be used without the credibility of independence and thus without the assurance that price stability will be maintained. Of course, the real test of this may come when we reach the point at which policy needs to be tightened. Actions will speak louder than words. But the great value of central bank independence – and the reason why it is rightly regarded so highly – is because it is a regime that provides the most powerful set of incentives possible, to do the right thing when that time does come. We are 2/3  BIS central bankers' speeches  individually accountable and collectively responsible to Parliament for acting, without fear and favour, to hit the inflation target. Not to do so, as well as being in breach of our statutory duties, would also be found out almost immediately by financial markets. Inflation expectations would become de-anchored.

This period has included a global financial crisis, a global pandemic, and in the UK the decision to leave the European Union. Monetary policy has had to adapt to this world of larger shocks, in an environment where the trend to sustained lower equilibrium interest rates around the world has made the so-called effective lower bound a very pertinent issue. As a first observation, therefore, the task of monetary policy has moved from being a choice (albeit not an easy one) on a single dimension (the official interest rate) to a more multi-dimensional choice which also involves decisions on which tools to use, and which tools to develop – have “in the box” – for possible future use should the need arise. There are important issues of substance here. Close to the lower bound, the transmission of policy tends to be less effective – not redundant or worthless, but nonetheless less effective. But this does not make monetary policy pointless or unnecessary. There are also important challenges to signalling that follow from this greater element of multidimensionality of decisions. So-called toolbox decisions should not contain signals on preferences for the actual setting of policy. In other words, central banks should develop and maintain a broad range of tools and seek to communicate this in a manner which avoids being interpreted as a signal on immediate or future preferences on policy setting.
The ECB is purchasing bonds in the market to stimulate activity and boost inflation, but has now begun to reduce the pace of its purchases. The policy rate in Sweden is also negative, with the latest reduction made in February 2016. The Swedish 1/4  BIS central bankers' speeches  Riksbank’s forecast indicates that the first policy rate increase will occur next year. Chart: Oil prices Oil prices gradually rose through 2016 and have in recent months hovered around USD 50 per barrel. Futures prices indicate that oil prices will remain close to today’s level in the years ahead. Oil prices have almost doubled since reaching their lowest level in early 2016, but are nonetheless less than half the level recorded before the steep fall in oil prices in summer 2014. Petroleum investment has declined markedly compared with the 2013 level. Lower oil industry demand has affected the wider economy. Last year, growth in mainland GDP was at its lowest since the financial crisis. Chart: Unemployment Unemployment increased through 2015 and to some extent in 2016, particularly in southern and western Norway. So far this year, the labour market has improved and unemployment has fallen. Monetary policy supports the necessary restructuring of the Norwegian economy. The key policy rate is low and the krone depreciated in pace with the fall in oil prices. Combined with moderate wage settlements, the krone depreciation has contributed to a marked decline in relative labour costs, strengthening the position of Norwegian firms exposed to international competition.

The financial regulator relaxed a set of regulations and allowed 1.6 million loan restructuring operations and postponed by one year the entry into force of the capital requirements established in the New General Banking Law. Finally, the CBC has applied some 20 measures aimed at expanding the monetary stimulus, deepening it through non-conventional instruments to encourage credit and liquidity, stabilizing financial markets, and gaining space to address additional stressful scenarios. These measures have pledged resources equivalent to more than 20% of GDP, doubling the size of the Bank’s balance sheet. These efforts have paid off. The decline in activity stopped in June and in the four months since then it has recovered more than half of the losses of the previous four months. As a result, almost a third of the workers who lost their jobs have obtained new ones and a large number of those who benefited from the Employment Protection Law have returned to their occupations. In the third quarter, fiscal transfers were able to compensate for all the fall in labor income of the poorest 20% of the population, and the remaining 80% will have obtained liquidity that far exceeds the loss of income through the withdrawal of pension savings. There is evidence that the FOGAPE-guaranteed loans reached preferentially the companies most affected by the drop in sales, which helped them to resume their activity.
Governments preferred to close their eyes rather than to consolidate the edifice. None of the Member States listened to the warning bells that were regularly sounded, notably by the ECB. At the same time, the markets also closed their eyes to the widening gaps within the euro area. Once the single currency was in place, everyone found it convenient to disregard the area’s economic divergences and differences in competitiveness. The result is that today we have a monetary union zone, but the heterogeneity of its different economies has increased. What a mea culpa ! It is not a mea culpa. The ECB and the Governing Council, of which I am a member, have never contributed to this indifference. On the contrary, over the last ten years we have signalled and highlighted these risks. However, neither markets nor governments took any notice. Everyone benefited from what I would describe as an “incredible” decade, with interest rates decreasing for everyone across the board and certain countries posting exceptionally dynamic growth rates in an essentially inflation free environment. In that context, everyone got access to cheap debt financing relatively easily. The wake-up call is all the more painful today as a result. The financial crisis obliges us to completely rethink the European social model that is substantially state-financed. Was Europe ready for the single currency? The founding fathers of the euro, and particularly François Mitterrand and Helmut Kohl, imagined the euro as a major stimulus for greater European integration.

This real quantity has to be exchanged among members of the society. Since it is practically impossible to trade one commodity for another commodity in a modern complex economy, there arises the need for adopting a common medium of exchange. “Money” offers the service of this common medium of exchange at the cheapest cost to conclude the transactions running into billions. BIS Review 48/2007  1  Money, unlike the real commodities, is a peculiar animal. Its usefulness arises from its ability to acquire real goods and services which people can enjoy. If money does not have this ability, no one would be interested in having money. Hence, the value given to money is simply an imaginary value . As a result, money bears a nominal feature, as against the real feature borne by other goods and services. That is why any value measured in terms of money is also known as a nominal value. We may illustrate the role played by money in an economy by considering the operation of a simple economy where there are only two commodities, say, coconuts and money. Everybody has to use money to get coconuts or use coconuts to get money so as to store their wealth (for getting coconuts in the future). Suppose there were 10 coconuts and 100 units of money. Then, each coconut has to be exchanged for 10 units of money per coconut.
The government having revised its Remit to the MPC, the Committee has, in effect, formally clarified that it is adopting a probing approach to policy in order to strike the right balance between risks to stability and the risks of sclerosis. To be clear, I do not see the Forward Guidance – and personally would not favour – committing the Committee to knowingly keeping policy loose beyond the point that would be prudent. I say that because, in parts of academia and the commentariat, the expression “low for long” is used in a rather special way to mean just that: that policy should be loose beyond the period that, ex post, would warrant special stimulus, in order actively to deliver a persistent rise in inflation and inflation expectations above target, thereby pushing down prevailing real rates of interest and so accelerating recovery.2 While not without insight on the mechanics of monetary stimulus, that stream of economic modelling makes the absolutely critical assumption that even as the monetary authority deliberately generates a persistent rise in inflation, its anti-inflation credibility remains 100% intact; later, the central bank simply announces that things are back to normal. That is utterly unrealistic. To re-iterate: the MPC’s forward guidance provides an articulated framework for a probing approach to policy, without a change in our preferences on inflation.3 Saying more about the Committee’s approach to policy in this way might be particularly valuable during a period when signs of recovery have become more apparent.

But in the limit monetary policy can be a backstop – as booms and busts increase the likelihood that inflation will be volatile in the future. Overall, the Committee’s Forward Guidance can forestall avoidable uncertainty about its “reaction function”, about how policy will be set. But it does not affect the greater uncertainty about the evolution of the recovery. Uncertainties about the economic outlook Of course, financial markets inevitably transform the Committee’s state-contingent guidance into predictions of when the Committee will begin to withdraw monetary stimulus; the markets trade instruments with different maturities, ie with time-contingent features not with statecontingent contractual triggers. But the MPC provided state-contingent guidance for a reason. We cannot wave away the uncertainties surrounding the performance of the real economy. If we only understood why productivity growth has been so weak, we could be more confident about whether or not it will recover in tandem with a recovery in spending. If that does happen, the fall in unemployment could be slow, and monetary stimulus might not need to be withdrawn for some time. If, on the other hand, productivity growth remains weak, job creation as the economy recovers could be strong, as it has been on average over the past couple of years. That is why there is a wide band of uncertainty around the MPC’s August forecast for unemployment. My own probability distribution for unemployment is broadly “flat” in the sense that I do not regard one of those scenarios as materially more likely than the other.
In the same vein, we also need to monitor very closely the possible adverse impact from fiscal developments on the inflation outlook. All in all, risks to the inflation outlook seem to be tilted to the upside. This notwithstanding, inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. Let me turn to the banking sector. Adjustments are continuing in light of a re-focusing on core business and markets, the necessary re-organisation arising from state aid and forthcoming changes to regulatory environment. Although there have been improvements, profitability remains subdued. Further credit-related write-downs are expected throughout this year, and  BIS Review 51/2010  1  the risk of a negative feedback loop emerging between the household and corporate sectors and the banks persists. Banks’ may remain under pressure to continue the process of deleveraging, with possible credit constraints impacting on economic growth in the event of credit demand picking up. Thus, although the response of policy-makers to the crisis has certainly helped to avert an even more dramatic collapse in economic activity in the euro area and elsewhere, challenges abound. Indeed, most advanced economies will continue to face severe macroeconomic imbalances in the years to come. I am particularly concerned about the dramatic deterioration in public finances, which will require very ambitious fiscal consolidation efforts in the years to come.

The crisis is also expected to have lasting effects on our economy, as both the level and the growth rate of potential output are most likely reduced for a longer time. Turning to price developments in the euro area, according to Eurostat’s flash estimate, annual inflation increased to 1.5% in March, from 0.9% in February. This was higher than expected. While this does not change our assessment, it is important to understand whether the surge in inflation in March is temporary or more lasting in nature. This is difficult to assess without a breakdown of developments in the overall HICP, which will only become available tomorrow (16 April). However, it seems reasonable to consider energy and food prices as the main drivers behind the higher than expected inflation outcome in March. Looking ahead, we expect inflation in the euro area to remain moderate over the policyrelevant horizon. The outcome of our monetary analysis confirms the assessment of low inflationary pressures over the medium term, with money and credit growth remaining weak. At the same time, we need to monitor price developments in the more dynamic regions of the world very closely, as well as the evolution of commodity prices and their potential impact on global inflation. Notably, a multi-speed recovery of the world economy, with some regions growing fast, while the recovery in others remains rather slow, has the potential to exert upward pressure on prices.
We presume that oil prices will tend to go down. Consequently, inflationary pressure will subside somewhat, particularly towards the end of 2005. With an unchanged monetary policy, we are likely to see an inflation rate of 0.9% in the first quarter of 2006. 2. Continued recovery  In order to assess inflation in the medium term, economic prospects are paramount. During a phase of economic recovery, as we are currently experiencing, how rapidly the capacity utilisation rate increases is important from a monetary policy perspective. Even though GDP growth in the fourth quarter of 2004 is likely to be lower than we projected in the September assessment, we expect the Swiss economy to expand by close to 2% this year. The upswing will continue next year. We anticipate a growth rate of 1.5% to 2% for the whole of 2005. The fact that the economy braved the oil price hike and the stronger franc is testimony to a robust recovery. There is less uncertainty now as to the inflation prospects for next year. Utilisation of economic resources, which is slowly increasing, will not lead to any additional pressure on prices in 2005. As can be gleaned from the new inflation forecast, improved capacity utilisation is likely to have an impact on price development only in the course of 2006. 1/3  The current inflation forecast for the medium term, ie for the coming two years, is characterised by a similar course to the one charted in September.

Such availability has served as a valuable source of information in credit assessment and help expedite loan processing time. In the same vein, with greater availability of information on SMEs from the Bureau, the processing time for SME loans can be similarly shortened and decisions to grant financing can be made based on a more comprehensive set of information. We hope and encourage the financial institutions to avail themselves of the services provided by the Bureau and help create a healthier and more transparent credit culture amongst the SMEs and lenders. I would now like to take this opportunity to congratulate all the award recipients today. We hope the recognition accorded by CGC will help to create a better understanding of the spirit behind this initiative, which is aimed at fostering mutually beneficial working relationship between the CGC and the financial institutions for the over-arching objective of promoting SME sector development. You have certainly given us your unwavering support through your active participation in our guarantee schemes. We look forward to your greater participation in the future. On another note, I would take this opportunity, in conjunction with our 35th AGM, to thank all employees of CGC for their understanding and commitment in adopting and adapting to changes. This include the internal organizational change that we have been through in the past two years to face the challenges of the dynamic business environment of today. Thank you for the kind attention and have a pleasant day. 2  BIS Review 75/2008