samchain/econo-pairs-v1 huggingface dataset:
We believe that community support for our monetary and banking policies, and confidence in our financial system are strong. But we also know that confidence cannot be built on blind public faith in a remote monetary authority carrying out its esoteric policies in a quiet and mysterious way: it must be nurtured through explanation, through informed discussion, through a system that is both accountable and transparent. The safety of our banks and the stability of our currency are everybody’s business, and the Asian financial crisis has brought this fact home to the people of Hong Kong. Economic hardship has prompted more people to ask more questions about the way Hong Kong manages its monetary and banking systems. Energetic policies, such as the operation in August, have also stimulated debate some of it heated - over the rights and wrongs of what we are doing. Quite properly, the Legislative Council has been the focus of much of this debate, not just in its motion debates, but also in the many discussions organised by this panel on a variety of subjects. We have seen more interest in our work from Members during the past year than in any other year since the creation of the HKMA in 1993. I welcome this attention. It gives us the opportunity to enter into productive discussion with those who know and represent the community. It also shows that accountability is alive and well.

Mr Yam presents the 1998 Hong Kong Monetary Authority’s annual report Speech by the Chief Executive of the Hong Kong Monetary Authority, Mr Joseph Yam, on the occasion of the presentation of the 1998 HKMA annual report before the Legislative Council Financial Affairs Panel in Hong Kong on 3 May 1999. Introduction Mr Chairman, Honourable Members, I am most grateful to you for giving me this opportunity to speak to you on the occasion of the publication of the HKMA’s Annual Report for 1998. The Report is tabled at this meeting of the Financial Affairs Panel; it is also being distributed to all Members of the Legislative Council this morning. This Report covers the full range of the HKMA’s work for the calendar year 1998, in addition to giving an assessment of the economic and banking environment for the year. I have no need to remind Members that 1998 was, to put it mildly, an eventful year. The Report sets out the many problems and challenges that the HKMA has had to grapple with during the course of the year, and explains what actions and initiatives the HKMA has been taking to address them. You are all familiar with these issues, and you have the details before you. So I do not wish to take up too much time with a long description. My main focus in this presentation will be on the challenges for the HKMA in the coming year, particularly in the light of current economic trends.
There are two main reasons for the pressures affecting the internationally-exposed sectors: the synchronised economic slowdown over the past year or so in all major industrial countries, on the one hand, and the puzzling persistent weakness of the euro in foreign exchange markets not just against sterling but even more against the dollar, on the other. What that has meant for the UK manufacturing sector is that output in the year to November (the latest month for which we have internationally comparable data) fell by 5.7% and employment fell by 153,000 people, or by nearly 4%. For what it's worth, we were not alone. Comparable figures show that manufacturing output fell by over 13% in Japan, by 6.7% in the US and by 4.3% in Germany, while manufacturing employment fell by 5% in Japan, over 6½% in the US and around ¾% in Germany. The frustrating thing is that, with the best will in the world, there was not much that either we at the Bank or the UK Government could have done to ward off the pressures on UK manufacturing, which had their origins abroad. That's fairly obvious where we are talking about the global slowdown - with negative growth last year of about 1¾% in Japan (fourth quarter on a year earlier) and roughly zero growth in the US and Germany. We can go to international meetings and encourage the respective authorities there to stimulate their economies, but there is nothing that we can do about it directly ourselves.

The theory is that, in a liberalised global financial system, international capital flows reward countries with sound economic policies and punish those which pursue unbalanced and inconsistent policies. International capital flows also prevent distortions from getting as far out of line as they would if the economy in BIS Review 53/1999  2  question was closed to outside investors. Thus, according to this view, capital flows act as an early warning system that forces quick corrections of policy errors. Undoubtedly, there have been circumstances in the past that have lent substance to this view. In the Latin debt crisis of the late 1970s and early 1980s, for example, many borrowers were clearly pursuing unsustainable and destabilising macroeconomic policies. The resulting outflow of funds and the short-term economic crisis that ensued served to bring policies to task and to trigger lasting economic reforms in some countries, notably Chile. More recent experience, however, raises serious questions about this view of the role of international capital as a robust, reliable and objective referee of the soundness of economic policies. Events during the Asian crisis naturally come to mind. The flight of international capital bore practically no relation to a forward-looking assessment of changes in the policies and macroeconomic fundamentals of the region. It is true that some countries were pursuing quasi-fixed exchange rate regimes that may have allowed pressures to build up for too long.
That would imply an increase of around 1 trillion euros. There is considerable debate amongst economists and market participants as to whether the size of a central bank’s balance sheet is a relevant  2  BIS central bankers’ speeches  parameter; and, above all, whether it has an impact on inflation expectations. Let me give you my take on this. The statement by the Governing Council is not formulated as a firm commitment but as an expectation. Nevertheless, it is very significant. It should certainly be seen as a clear indication that further policy action, if necessary, will not be inhibited by any overall quantitative restraint or limit. This is all the more important that the Eurosystem balance sheet will be expanding whereas balance sheets of other central banks are bound to contract. Communication on the size gives a very concrete signal and content about future policy intentions. As such, it can only help in bringing expectations more in line with our definition of price stability. I will end up with two remarks on the relationship between monetary and other policies. First, when inflation is low, it matters whether nominal wages are rigid or flexible. Japan benefits from a high degree of wage flexibility. That is favorable to competitiveness, but may increase the economy’s vulnerability to deflationary pressures. By contrast, in Europe, and especially in France, nominal wages are fairly rigid and keep growing, even in the current context, at a robust 1.1% annual rate.

If inflation deviates from target by more than 1 percentage point, the MPC has to write a public letter to the Chancellor to explain why, and what it is doing to bring it back. These arrangements remain relatively novel and unusual in UK constitutional terms. Prior to 1997, a longstanding objection to Bank of England independence was concern that such arrangements would be inconsistent with Ministerial duty to answer to the House of Commons on major matters of policy. A high level of transparency and openness about MPC decisions has been a critical aspect of meeting expectations of parliamentary and public accountability as well as an effective way of enhancing the credibility of monetary policy. In fact greater openness about monetary policy was part of the package of changes that were made to restore credibility after the UK’s exit from the ERM in 1992. The Bank played its part by introducing a new quarterly Inflation Report, which by 1997 had won widespread respect for its objectivity and  1  Goodhart, C (1999) ‘Recent developments in central banking: some special features of the Monetary Policy Committee and of the European system of central Banks’ Jean Monnet Lecture, Dublin European Institute, 1999. BIS Review 17/2005  1  professionalism. Against this background, the 1998 Bank of England Act required the new Monetary Policy Committee to sign off the Bank’s Inflation Report. In practice, the MPC’s sign off has been far from a formality, though the Inflation Report formally remains the Bank’s report.
This has led, I believe, to a BIS Review 5/1998  -2-  better awareness—among market agents as well as a wider public—of how monetary policy works. One indication of this is that agents’ expectations about monetary policy have become increasingly congruent with the Riksbank’s monetary policy intentions. In addition, the five-party agreement on the new Riksbank Act is a manifestation of broad political support for the low-inflation policy. It is our ambition, moreover, to continue the process for increased transparency as far as is reasonable and feasible. Criticism of monetary policy Monetary policy has, of course, come in for some criticism. A common issue initially was whether striving for 2 per cent inflation was reasonable and feasible. That discussion seems to have dried up. Inflation is currently around 2 per cent and more and more people understand the advantages of this. Another question has been why the Riksbank does not have the task of promoting other objectives, growth, for example. Here, too, there is a growing awareness, though it does not include everyone. In the long run monetary policy is only capable of influencing inflation and there is absolutely no long-term trade-off between inflation and growth. If anything, high inflation tends to impair real economic development. In the short run, however, the situation is somewhat different. In this perspective, inflation and growth are largely two sides of the same coin, at least as long as inflation expectations are stable around the target.

The overall assessment of inflation, based on an unchanged instrumental rate, accordingly pointed to a risk of the inflation target being exceeded as economic activity became stronger. Moreover, the high inflation expectations contributed to excessively high wage settlements in the spring of 1995. It was partly this—not the price effects from budget consolidation—that warranted the upward adjustments of the instrumental rate from August 1994 to July 1995. Transitory effects again conditioned the rate of inflation during 1996 and 1997 but now in a downward direction via falling house mortgage interest costs. The krona’s appreciation, in connection with the rapid enhancement of confidence in budget policy, also tended to lower the CPI. Had the Riksbank continued to reduce the instrumental rate—after the earlier cuts had had a transitory downward effect on inflation’s current rate—it would have tended to destabilise the economy. The Riksbank would, as it were, have been chasing its own tail, with interest rate cuts that became increasingly large and frequent. Inflation expectations and actual inflation would ultimately have risen, obliging the Riksbank to swing to a markedly restrictive stance. As interest rate increases also have transitory effects on inflation, the Riksbank would BIS Review 5/1998  -4-  again start to chase its own tail but now in an upward spiral. This illustrates how absurd it would be to raise or lower the instrumental rate as a response to the direct, but transitory, effects of the Riksbank’s own monetary measures.
The results and any consequences that flow from them will be announced later this year. The second objective is to reduce the risk of excessive indebtedness itself by taking out insurance. Given recent experience, few can now believe that the right policy is to wait to mop  for-one with income, supply constraints are likely to put increasing pressure on prices in a now rapidly-growing economy. 6  That is high relative to other advanced economies. Household debt stands at between 105% and 115% of disposable income across the Euro-area, US and Japan (IMF, 2014). 7  By latest estimates, around 40% of new mortgages were at LTIs of at least 3.5x. 25% at were at LTIs of at least 4x. 10% were at LTIs of at least 4.5x. BIS central bankers’ speeches  5  up the consequences of debt-driven busts after they crystallise. That is even more obvious when Bank Rate is at its effective lower bound. In other words, when you hear the thunder of the falls, it is wise to get off the river. Measures to take out insurance can be graduated and proportionate if action is taken sufficiently early. We can limit risks tomorrow by acting against a loosening in underwriting standards in new mortgage lending today. The value of acting early is reinforced by uncertainty around the precise impact of macroprudential tools.

BIS central bankers’ speeches  7  That need was behind the recent transformation of the Bank of England’s sterling market framework for banks, and it is why I can announce that, in the coming year, the Bank will widen access to our facilities to include the largest broker-dealers regulated in the UK and to those central counterparties authorised to operate in UK markets. We will also look into whether we should further develop our capacity to lend in currencies other than sterling. Conclusion As tonight’s announcements demonstrate, promoting a durable and balanced expansion will sometimes require coordination between the Bank, the Treasury, other public authorities and the private sector. The Bank will also have to act on its own by using all of its tools in as complementary a fashion as possible. The FPC is considering using macroprudential tools to insure against potential vulnerabilities associated with the housing market. Doing so could reduce the need for monetary policy to be diverted to address a sector-specific risk. However, macroprudential policy is not a substitute for monetary policy. If it is used for insurance it won’t necessarily affect the path of interest rate increases. The need for internal balance – to use up wasteful spare capacity while achieving the inflation target – will likely require gradual and limited interest rate increases as the expansion progresses. The start of that journey is coming nearer. Unlike a canoe trip, the quest for economic balance never ends.
If we are to move forward, we will certainly need leaders with your third quality: your statesmanship. I have witnessed this in action during many long nights in Brussels and at global meetings. There is much I have come to admire in you at such times. You are a formidable negotiator, yet I have always known you to be fair and straight, allowing points of difference to be identified and solutions to be found. One of the qualities I cherish is that you are a straight-talker. You speak “Klartext”, as you say in German. Your directness has always been married with loyalty and kindness, however. You know that successful diplomacy is built not through sheer force of personality, but through shared understanding with one’s partners, and especially within Europe. There were times during the crisis when you had to take tough decisions. You spoke recently of your sadness for those who have suffered, and said that you often think about how we could have done things differently. 5 That is the mark of a true statesman: the capacity to examine profoundly the best course of action, while avoiding false certainty. Wolfgang, for the past two years you have taken on a new role as President of the Bundestag. It is a step that befits a life dedicated to German and European democracy. Yet again, you are the 2/3  BIS central bankers' speeches  right person, in the right place, at the right time.

This is in line with the growth in the activities of the two existing cross border PvP links recorded by us. Since 2010, the combined average daily turnover of the links with Malaysia and Indonesia has doubled, reaching a new record of $ billion last month. This is equivalent to an annual growth of about 23%. Other economies in the region, especially those with significant FX transactions, can similarly be benefited from a reduction in settlement risk and increase in efficiency in the settlement of FX transactions by establishing a PvP link with the USD RTGS system in Hong Kong. 9. The HKMA will continue to watch out for opportunities to collaborate with Asian neighbours to develop infrastructural solutions to meet growing regional demand for more efficient and robust settlement solutions. 10. Lastly, I would like to thank BOT again for the Bank’s commitment and professionalism leading to the successful launch of the PvP link. Based on the solid foundation laid through this project, I keenly look forward to working with BOT in other areas of central bank cooperation to contribute further to regional financial stability and prosperity. 11. Thank you. 2  BIS central bankers’ speeches
Economic performance The economic numbers that came out in the past few months seem to convey a clear message, and this is that the economy has, since the second quarter of this year, been slowly but steadily recovering from the painful recession, which had lasted for about eighteen months. The growth rate of GDP moved back to positive territory in the second quarter of this year, having been in negative territory, year on year, for six quarters. The unemployment rate has peaked. Asset prices have recovered. Retail sales have picked up. Tourist arrivals have increased. Exports have started to grow again, with the external trade account at the same time moving into surplus. The fall in consumer prices, adjusting for the effects of the generally welcome rebate of rates and lowering of rentals, has stabilised. Monetary conditions have remained stable, although we could do with lower interest rates. The overall quality of bank assets, and the mortgage portfolio in particular, has improved. On the fiscal side, although I am not privy to any information that has not been made public, I have the fullest confidence in the skills of the Financial Secretary in his management of the public finances. As the economy recovers, the fiscal position should quickly move back into overall balance. An 18-month period of sharp recession and painful adjustments is, of course, very tough for everyone.

This is ultimately the objective of the next phase of banking union: building a single European supervisor via the Single Supervisory Mechanism (SSM). There are four ways in particular I expect the SSM to make a difference to banking in Europe: by improving the quality of supervision; by creating a more homogenous application of rules and standards; by improving incentives for deeper banking integration; and by strengthening the application of macro-prudential policies. The SSM should create the conditions and incentives for deeper integration of the European banking market, which should in turn make the euro area less vulnerable to fragmentation. Barriers that existed in the past to deeper retail banking integration, for example opaque supervisory approval procedures, will no longer be relevant with a single European supervisor. The substantial compliance costs that came from having to observe different sets of rules and interact with several different authorities should also be reduced. At the same time, the benefits of cross-border integration should increase. Cross-border banking groups will be able to optimise their internal management of capital and liquidity. Further efforts to reduce fragmentation and a drive to achieve genuine banking integration can help Europe exit the crisis in at least three ways. First, more integrated banking markets intensify competition: banks, as well as other financial market participants, will have to change their strategies. More competition means that capital is allocated more efficiently. This promotes access to new funding opportunities for companies, encourages investment and thus contributes to higher economic growth.
Last autumn, the Storting decided to spend less than 3 percent of the Fund over the fiscal budget for 2014. It would seem that the return and actual spending of petroleum revenues are moving in opposite directions. The figures 3 and 4 have apparently switched places since 2012. Petroleum revenue spending is not falling in absolute terms. On the contrary, fiscal policy has stimulated overall demand in the mainland economy over several years. The sharp increase in the value of the Fund is the main reason behind the decline in the percentage share of spending via the fiscal budget. Quite paradoxically, low growth and low interest rates abroad are probably the main factors behind the solid performance of the Fund over the past two to three years. 6  BIS central bankers’ speeches  Chart 10: Annual return on the GPFG Since the end of the 1990s, a persistent fall in yields has driven up government bond prices. In recent years, the unconventional monetary policy measures of the world’s major central banks have contributed to even lower interest rates and higher prices for equities and other securities. This has resulted in above-normal returns on the Fund’s investments. But today there is no longer room for a considerable fall in interest rates and equity prices have risen to fairly high levels. Chart 11: Annual return on the GPFG divided into value gains and cash flow Our return measure includes both value gains and direct cash flows, which comprise dividend and interest income.

This year’s bicentenary of the Norwegian Constitution is an occasion to remember the importance of good institutions that have clearly defined roles. This is essential for stability and progress. Come what may. Thank you for your attention. BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13  14  BIS central bankers’ speeches  BIS central bankers’ speeches  15