samchain/econo-pairs-v1 huggingface dataset:
Peter’s review of “What’s the Use of Economics”, the book of proceedings from a conference organised and edited by Diana Coyle, another former student who gave the second of these lectures, held at the Bank of England nearly a decade ago, is Peter at his kaleidoscopic best and as relevant now as when he wrote it. 2  For me as an undergraduate student in the early 1980s it was incredibly stimulating to be learning from Peter about Keynes’, Hicks’ and Leijonhufvud’s contributions to disequilibrium economics, all framed by Peter’s  own quantity rationing exposition of multiple equilibria. It was even more exciting to be taught by someone who was writing about the real-world economic problems of unemployment and how policy could help to achieve a better equilibrium – Peter penned a comprehensive overview article with Derek Morris in the second edition of OxRep in 19853 which is still a very good read today.4  It should therefore come as no surprise that one of the many other topics that Peter turned his prodigious mind to was QE and monetary policy.

I wrote mine on the European Monetary system, then in its first phase; it was my first exposure to analysing an active policy tool. I recall that it turned out to be rather heavy on institutional detail about the EMS and rather light on the economics and efficacy of exchange rate regimes. At the end of my presentation Peter, first, went out of his way, as he always did in response to any presentation, to compliment me on all the efforts I had put in. Only after that, did he then, in his characteristically gentle but incisive way, set out several avenues I might follow in developing my analysis of nominal versus real adjustment. In doing so Peter drew on a whole host of references and models that he could call on from memory, some of which I’m sure found their way into Modern International Economics, the textbook Peter wrote with Shelagh Heffernan, his first wife, who died in 2010. 1  The IEO’s report is available on the Bank of England website, as is the Bank’s response. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  Peter seemed to be focused on the most important and relevant policy issues of the time – he always wanted to learn more about the world and to suggest ways that economics and economists could improve it. And he conveyed that enthusiasm and ambition to each student intake and to his colleagues.
This points to the many benefits from leaning against the build-up of financial imbalances, while pursuing the price stability objective. To some extent, successful macro-prudential policy could alleviate the need for monetary policy to “lean against the wind” as regards unsustainable financial trends. The two policy areas should however operate with a clearly distinct set of tools. Effective governance arrangements need to be in place, so as to maximise credibility and preserve institutional independence. 6  BIS Review 87/2010  IV. Conclusions  Ladies and gentlemen, I started my talk with a reference to architecture and, as we progressed, I reviewed the many building sites – at various stages of development – of the reforming financial system. It will be very challenging to keep momentum in the reform agenda and to keep the activities of the many building sites on track as “battle fatigue” inevitably settles in. But the crisis has also painfully demonstrated that sound foundations are indispensable to withstand the occasional blows that hit the financial system. Therefore, it is all the more important to continue vigorously pursuing the ambitious financial reform agenda. I thank you for your attention. BIS Review 87/2010  7

You have probably seen pictures of bank runs – when queues form outside banks in crisis as people want to withdraw their money in the form of (safe) cash. This is why central bank money is still the linchpin of the system, even if it is rarely used in normal circumstances. The fact that it is available as an alternative acts as a kind of guarantee for the private bank money. 4 It is also the case that some key systems for payments are increasingly concentrated to a few agents. See, for instance, the card payment market where two American companies are entirely dominant in Sweden. Unlike our neighbouring countries, we do not have any domestic card payment network. This means that we are dependent on foreign infrastructures to make the majority of households’ payments. Without cash, therefore, an important part of the Swedish infrastructure would be completely in private ownership and dependent on foreign infrastructures and foreign companies. So if the use of cash continues to decline, it is not enough to say that this works fine at present, because the future will look rather different, regardless of whether we produce an e-krona. Other functions that cash has performed include functioning as a back-up when there have been disruptions to other forms of payment. It has also helped ensure  3  See, for instance, Fung et.al. (2018) and Söderberg (2018). 4 See, for instance, Tobin (1985).
In crafting regulations in response to Dodd–Frank, we need to restore market discipline in banking and let the market mete out its own brand of justice for excessive risk-taking rather than prolong the injustice of too big to fail. It is not difficult to see where this dynamic, if uncorrected, will lead – to more pronounced financial cycles and recurring crises. I would argue that the failure to reform the banking system in Japan was one of the principal reasons for that country’s “Lost Decade(s).” We must not let that pathology take hold here. Making matters worse If we do not keep this ultimate goal of reform firmly in mind, our rule making not only might fail to promote the original objectives of reform, but could actually work against them. Ironically, with Dodd–Frank, such a perverse outcome is a distinct possibility. The Dodd–Frank law entails the writing of more than 200 proposals and rules covering a host of issues – risk-based capital requirements, ability-to-pay requirements for home mortgages, protections for consumers sending remittances to foreign countries and so on. The Congress decided the need for these rules to be written, drawing on the input of many, including some very thoughtful economists. Here, I think it wise to draw upon the insight of the classical liberal Frédéric Bastiat in his take on unintended consequences.

The fact is that the largest commercial banks played a major role in many of the more problematic phenomena of the recent credit boom and ensuing crisis, including the spread of what I have previously referred to as financial STDs, or securitization transmitted diseases. In the aftermath of the Panic, these viruses linger. Last week, the New York Times printed an interesting article by Joe Nocera, who drew upon the observations of a highly regarded regional banker from Buffalo, Robert Wilmers of M&T Bank.10 Wilmers claimed that of the  7  See the Dodd–Frank Wall Street Reform and Consumer Protection Act, http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4173enr.txt.pdf. 8  See “Restoring American Financial Stability,” a summary of the bill, http://banking.senate.gov/public/_files/FinancialReformSummaryAsFiled.pdf. 9  See “Paradise Lost: Addressing ‘Too Big to Fail,’” speech by Richard W. Fisher at the Cato Institute’s 27th Annual Monetary Conference, Nov. 19, 2009, and “Minsky Moments and Financial Regulatory Reform,” speech by Richard W. Fisher before the 19th Hyman P. Minsky Conference, April 14, 2010. Also see note 5 and “The Blob That Ate Monetary Policy,” by Richard W. Fisher and Harvey Rosenblum, Wall Street Journal, Sept. 28, 2009. 10  See “The Good Banker,” by Joe Nocera, The New York Times, May 30, 2011. BIS central bankers’ speeches  3  $ billion made by the six largest bank-holding companies last year, $ billion derived from trading revenues.
The idea is to mobilise all employees, in order to bring out the innovations that are most suited to our missions and then have them implemented by “intrapreneurs", who are bestowed with great autonomy, comparable to that of start uppers, for the development of their project. Our first intrapreneurship programme will enable us, I hope, to benefit within 9 months to a year from artificial intelligence tools to conduct our supervisory missions. All of these initiatives are as vital as they are exciting. They are the DNA of our institutions, and I am convinced, the reflection of that of the French and European ecosystem. Thank you for your attention. 4/4  BIS central bankers' speeches

Gent Sejko: New normal - challenges and opportunities Keynote speech by Mr Gent Sejko, Governor of the Bank of Albania, at the Conference on “New normal: Challenges & Opportunities”, European University of Tirana, Tirana, 30 April 2021. * * * Honourable Professor Gjuraj, Honourable Professor Xhepa, Dear students and participants, It is a great pleasure for me to greet the proceedings of this Conference on the “New normal”. This topic is both an emergent and unresolved issue of the current economic debate. We altogether: policy makers; academics; and operators in the private sector, are aware that a new reality lies ahead in the post-pandemic world. “What would be the contours of this new reality?”; “What challenges and opportunities lie ahead of the private sector?” and “Which will be the objectives and instruments of the monetary policy”. These questions still lack a thoroughly answer. For this reason, I would like to thank the European University of Tirana, for selecting this topic of an utmost importance. The European University of Tirana is a hearth of knowledge which has succeeded in positioning at the centre of: education; academic discussion; and innovation enhancement. Today, it manifests a consolidated profile in the academic debate. While trying to summarise the Bank of Albania’s opinion on the selected topic, following, I will address in my speech three specific issues: First, I will show briefly the impact of the pandemic on the Albanian economy and the measures taken by the Bank of Albania to minimise its effects.
Jon Nicolaisen: Challenges for the payment system Speech by Mr Jon Nicolaisen, Deputy Governor of Norges Bank (Central Bank of Norway), at Finance Norway's payments conference, Oslo, 1 November 2018. * * * Please note that the text below may differ slightly from the actual presentation. Changing payment landscape The way we make payments is changing. New services and operators are constantly appearing. The underlying infrastructure, our payment system, must be adapted to the changes. But where is this all heading? How will we make payments in the future? And what will the future form of money be? The forces driving payment market developments are new technology, changes in consumer behaviour, globalisation, and new regulations, such as the new Payment Services Directive (PSD2). PSD2 requires banks to grant third-party providers (TPPs) access to their systems to enable TPPs to offer payment and account information services. PSD2 is both a response to developments in the payments market and a catalyst for future developments. At the same time, a number of large international technology companies are moving into the payments market. Apple offers mobile payment services to Norwegian customers. Google has just launched its own mobile payment solution in Norway. Other operators will follow suit. The role companies such as Facebook, Amazon and Alibaba may take remains to be seen. Vipps is now the only Norwegian mobile payment solution. A planned merger of the Vipps, BankAxept and BankID systems was announced towards the end of 2017. The merger was approved by the authorities in summer 2018.

I understand the strong desire of the authorities to minimise the costs associated with the banking sector rescue, including costs incurred to date, and those still to come. Let me make some comments in this area. When the programme for Ireland was designed, the costs of the banking sector measures already in place, including the promissory notes, were fully factored in. The annual cash repayments of promissory notes is thus financed by programme resources. That programme is on track. Any deviation from that programme should be considered very carefully indeed. The perceptions that have built-up around Ireland’s successes in the programme should not be jeopardised. It has been hard-won and it is worth fighting for. Therefore, the ECB remains of the opinion that Ireland should honour its commitments stemming from the promissory notes, as foreseen. This in our view is the best way to regain sustainable market access. I frequently hear in the Irish debate the sense that the debt resulting from the bank rescue is not Ireland’s debt. I can understand this sentiment and how many people feel about this situation. But what must be understood, is that in the run-up to the crisis, insufficient domestic policies (banking supervision and economic policies) played a major role in excessive credit growth and risk management failures in the Irish banking sector, the bubble in the housing market and the loss of competitiveness. The ECB has no supervisory responsibilities, despite claims to contrary.
The knowledge gained from this certainly benefitted the series of organisational transformation we undertook at Bank Negara Malaysia to enhance our organisational effectiveness. As this BIS meeting is taking place in Asia, allow me to take the opportunity to say something about our region. While Asia has not been immune to the turbulence and the upheavals taking place in the different parts of the world, the region has been able to rise to the challenge and each time has demonstrated the ability to experience a swift rebound. Factors that have contributed to this resilience is not so much what we have done in response to the developments but it is what we have done previously that prepared us to weather these developments. These factors in varying degrees have included undertaking rebalancing and structural adjustments of our economies, economic and financial reforms, the development of our financial systems, pursuing greater fiscal discipline, building a more extensive policy tool kits, building buffers during the good times and advancing regional integration and cooperation. BIS central bankers’ speeches  1  For most of the region, following these efforts, our more diversified economies have become less vulnerable to economic shocks, our more diversified and developed financial systems have been better able to absorb and intermediate the financial turmoil and turbulence, while the financial reforms have also increased our flexibility and produced better price and exchange rate adjustments. Those with sound macroeconomic fundamentals including more sustainable fiscal positions also had the policy space to manage the implications of these challenging developments.

These loans are used to finance human capital investment projects with returns that are highly uncertain. It’s true that virtually every study finds that the returns on college degrees are high, on average, relative to their cost. But some people who take out student loans don’t end up with these high average returns. The net returns for some may, in fact, be negative. For example, many who have pursued vocational training may be less remunerated in the market. Similarly, some students attend certain for-profit universities with track records that indicate that their graduates have lower lifetime earnings than other types of educational institutions. While others drop out before receiving a degree – just 59 percent of the 2006 cohort had received their four-year degree by 2012. Of course, uncertain returns are a feature of most investments, but for other loan types this uncertainty is generally managed more effectively through credit underwriting, collateralization and risk-based interest rates. We are fairly confident in the aggregate statistics – over a trillion dollars in loan balances outstanding, 43 million borrowers and the highest delinquency rates of any form of household debt. But we know a lot less about the precise causes and consequences of the heterogeneity in the net returns to educational investments that I just described. What we know so far, based on very imperfect data, suggests that this heterogeneity is likely to be very important.
First, macroeconomic policies need to be adjusted pragmatically and where appropriate, swiftly. We do not simply mean that policy must be loosened but rather authorities ought to consider carefully their full range of options, giving due regard to the circumstances they find themselves in. For instance, in an environment where credit markets have ceased to function, monetary policy alone cannot do the heavy lifting needed to stabilize economic conditions. Second, swift action to clean up the balance sheets of financial institutions is very important to allow the financial system to resume its key intermediation role. Third, reforms, be they structural, legal, regulatory or accounting, should be an important part of the medium-term agenda, as they would serve affected countries well going forward. Not only should regulators be alert and vigilant in systemically important markets, they also need to keep up with the rapid pace of innovation. Finally, there needs to be a multilateral effort to improve transparency, standards and the quality of regulation. We welcome the work being undertaken by all parties in the Financial Stability Forum, of which the Fund is a key member, and expect the results will prove illuminating. 7. In drawing these conclusions, we must remember that we cannot entirely exempt ourselves from the booms and busts in credit markets, but instead recognize that sound regulations and prudent capital market practices can play a role in alleviating these cycles.

Obviously, it would also mean significant transitional costs for the countries that  7  For a comprehensive comparison of EU deposit insurance schemes, see European Commission (2007), Scenario analysis: estimating the effects of changing the funding mechanisms of EU deposit guarantee schemes, Joint Research Centre, February. BIS Review 17/2008  5  presently operate schemes funded ex post. Pre-funded schemes would also permit to mobilise very rapidly the guarantee which might be a decisive advantage to avoid bank runs. Such European convergence of deposit insurance practices would, however, not solve the problem that at least as important differences exist between European and non-European countries. Deposit insurance is naturally not only relevant for financial integration but also, very much, for the handling of financial crises. Clearly the cross-country differences I mentioned above (and several others more) are at least as much an issue for crisis prevention, management and resolution as they are for financial integration. Convergence in deposit insurance arrangements across European countries should not advance in a way that neglects either the financial stability or the financial integration aspect of it. Both need to be well aligned. Overall, we agree with the Commission’s “bifurcated” approach, according to which further progress at a shorter time horizon should first be achieved using the available non-legislative mechanisms and more fundamental reforms requiring legislation should be based on a deeper analysis, particularly considering the results of the debates on the financial stability set-up and burden sharing that are presently under way in Europe.
The reason for this, as I said, is that in Sweden and abroad, it is at this maturity that a sufficient number of transactions are carried out. For the rate to be credible and representative, there needs to be a steady flow of enough transactions on which to base the calculation. The interbank rates can be developed at longer maturities even with a very limited transaction base, precisely because there is scope for the banks' own judgements – but this is also what makes them lacking in objectivity and easier to manipulate. Alternatives to longer-term interbank rates being developed In order to address this problem, central banks in several countries are now working to ensure that the new reference rates can also replace interbank rates in contracts with longer maturities. In principle, it is possible to create forward-looking rates based on traded derivative instruments with the new rates as a base. However, in most countries the derivative markets based on the new reference rates are not yet large enough to form the foundation for reliable forward-looking reference rates. A simpler way forward is to calculate backward-looking average rates based on the history of the transaction-based reference rate. The average rates then show the average return over a given period, including a compound interest effect, based on daily SWESTR values during the period. The central banks of the United Kingdom, Norway and the United States and the ECB have already begun to publish backward-looking average rates or indices that can be used in a similar manner.

It is therefore positive that various sector forums have begun to discuss issues related to SWESTR. The Riksbank will continue to support the transition. We will have an ongoing dialogue with the market and will also shortly be sending out a survey to gather the views of different participants on issues related to the transition. However, it is important to emphasise that the role of the Riksbank is limited to, through SWESTR, providing the conditions for a new form of reference rate and contributing to analysis. It is the market participants who are responsible for the transition taking place. They will therefore have to drive forward the issue of a transition in order to ensure that a reference rate with a high degree of confidence also dominates in the Swedish financial market. 7 [8]  Of course, the Riksbank expects financial market intermediaries to take a great deal of responsibility in this process, but you too – who are to a large extent the end-customers of such participants – have a very important role to play. If you show your interest, it will facilitate a transition to a more transparent reference rate. Ask your bank contacts how they plan to introduce SWESTR into their operations. Request loans and other products that use SWESTR as an interest rate. Once the products are in place, start using them and thus help to create liquidity in the market.