samchain/econo-pairs-v1 huggingface dataset:
3 “The future of finance and the outlook for regulation”, Remarks by Vítor Constâncio, Vice-President of the ECB, at  the Financial Regulatory Outlook Conference organised by the Centre for International Governance Innovation and Oliver Wyman, Rome, 9 November 2017. 4/4  BIS central bankers' speeches

The current economic situation Before the war, the world economy was on a path of gradual recovery, following the most acute phase of the pandemic, although the recovery was already flagging from the second half of 2021 owing to global bottlenecks and the increase in inflationary pressures. The gradual path of recovery in activity prior to the Russian invasion of Ukraine was, in any case, highly uneven across geographical areas and sectors of activity. Thus, while some economies had already regained or even surpassed their pre-crisis levels of activity, others had not. Spain, despite having one of the highest levels of vaccination in the world, was among the latter. At the end of 2021, Spain’s output was still 3.8 percentage points (pp) below its pre-pandemic levels, while in the euro area as a whole this gap had already closed. One factor that would explain the difference in progress is the sectoral composition of activity. In particular, the recovery tends to be more delayed in those countries, like Spain, in which services that are highly dependent on personal interaction, such as those linked to tourism, account for a large share of the economy. Economic developments in Spain, and in the rest of the world, have been affected by upward inflation surprises since the second half of 2021, driven in particular by energy and food, although there has also been a slight rise in underlying inflation. Between December 2020 and March 2022, the annual increase in consumer prices rose from -0.6% to 9.8%.
Indeed, it has been observed in California that electric vehicles are bought mostly by households with 3/9  BIS central bankers' speeches  multiple cars, as a supplement to petrol-powered cars. Third, a global minimum carbon price makes economic sense but needs to be carefully designed. As emphasised by economist William Nordhaus, there should be a common, harmonised price of carbon, across sectors and across countries, that is equal to the global social cost of carbon. Every molecule of carbon dioxide that is emitted imposes the same social cost, regardless of where it is emitted from. It is unlikely that there will be an international agreement on a single global carbon price. But there are two ways in which global convergence in carbon pricing can come about. The first is through carbon credits and markets. If a sufficient number of countries have carbon taxes, it would facilitate cross-border trading of carbon credits which will help to drive carbon prices closer. The second is through the carbon border adjustment mechanism, or CBAM, which is a tariff that prices the carbon content of imported goods the same as the carbon emitted in domestic production. Advocates of the CBAM see it as a way to ensure that internalising a global externality in some economies does not lead to expansion of more polluting firms elsewhere. But opponents view CBAMs as being potentially protectionist and disproportionately hurting developing countries who lack the capabilities and support to decarbonise.

The invisible hand of the carbon price incentivises and coordinates emissions-reduction efforts in ways that regulation cannot achieve. While carbon pricing has gained traction globally, it needs to be higher and applied more broadly. The right price of carbon is the social cost it imposes on the environment. According to the World Bank, less than 5% of the emissions covered by a carbon pricing initiative are priced at a level consistent with achieving the goals of the Paris Agreement, namely $ per tonne of carbon dioxide by 2020 and $ per tonne by 2030. The idea of a federal carbon tax remains political anathema in the United States. Even the European Emissions Trading System currently covers only about 50% of the EU’s greenhouse gas emissions and gives many allowances for free. Singapore will progressively raise its carbon taxes from 2024. The current level of $ per tonne of CO2 equivalent will be raised to $ per tonne in 2024 and 2025, and $ in 2026 and 2027, with a view to reaching $ by 2030. This translates to a carbon price of roughly $ per tonne of CO2 equivalent in 2030. It is somewhat below the $ estimated by the World Bank of what a net-zero consistent price of carbon should be in 2030 but Singapore’s carbon tax covers about 80% of our national greenhouse gas emissions, much broader than in most countries. Singapore is also progressive in having a long tradition of high petrol taxes and no subsidies for fuel or electricity.
The other attraction of using the approach taken for the SMCR for future regulation is that it has been the preferred approach adopted by Parliament most recently when not constrained by EU regulation (for the rollout of the SMCR to insurers, which occurred in December 2018). This is an important consideration at a time of heightened debate, in a Brexit context, about so-called “Henry VIIIth” and “Cardinal Wolsey” powers. Although it is uncertain quite what those gentlemen’s views would have been on the output floor in Basel 3.1, my point is that making use of an approach recently chosen by Parliament seems to me to have considerable attractions relative to choosing something completely new and untested. Would it not, though, be easier and better simply to stick with the EU model through which we have recently imported a large volume of rules? This approach is radically different from the approach the UK has taken when left to its own devices. Indeed, the EU model, with a large body of technical rules set out in the equivalent of primary legislation, is quite different from how most of the world does it. For example, the EU and Switzerland were the only two members of the Basel Committee on Banking Standards where Basel 3 was implemented through primary legislation rather than the prudential authority’s rule-making powers – in major economies like the US, Australia and Canada the regulators did the implementation.

This means that any reforms to the MA will be a key determinant of success against all three of the government’s objectives for the Solvency II Review. My colleague Charlotte Gerken discussed in April how we use the MA as part of our supervisory approach, and I won’t rehearse the points that she made today4. As a regulator, we have long believed in the core concept behind the MA. We firmly supported its inclusion in Solvency II, and we brought in a similar mechanism in our previous Individual Capital Adequacy Standards (‘ICAS’) regime. There has been a lot of feedback about broadening of the asset eligibility criteria for the MA, and about simplification of the application process. We have heard this feedback, and are confident that the review can achieve improvements in these areas. If we get these changes right, the path can be smoothed for insurers to invest for the long term in a way which supports innovation and growth and is sustainable. Of course as I said earlier, unless there is adequate policyholder protection, any such changes will not meet these objectives. So through the QIS we will be gathering data around how the MA could be calculated, so that we can be sure that the reformed MA provides adequate protection given the wide range of assets annuity writers hold. Changes on eligibility and process don’t so easily lend themselves to a QIS, but they can be designed to ensure that the MA meets the government’s other objectives for the review.
This confirms their capacity to meet the targets set for 30 June 2012 by the European Banking Authority (EBA), thereby contributing to their adaptation to the future Basel III regulatory framework and the fulfilment of the objectives announced to the market. Lastly, the ACP has resolutely placed its individual supervision within a macro-prudential perspective. Our Authority has been particularly attentive to the way banks fulfil their role in financing the economy via the extension of loans to non-financial companies and to households, in a context in which both regulatory changes and liquidity constraints, particularly in dollars, have prompted certain groups to deleverage. It has undertaken an in-depth analysis and published studies on developments in household credit as well as the reallocation of households’ financial investments, particularly between bank savings products and insurance savings products. II)  2011 – and this is my second point – was a year that saw the reinforcement of the methods used in prudential supervision. It was above all the year in which the process of merging banking and insurance supervision was completed. Having been set up in the midst of the crisis that we are going through, the ACP continually reviews the methods it uses to deal with new challenges. On the one hand, the traditional activities of on- and off-site inspections have been enhanced by taking the best procedures and practices from each of the two sectors, leading to improved quality and comparability in the assessment of the situation of the different institutions being inspected.

Without going into detail at this stage, I will just mention: •  the work on the regulatory framework applicable to systemic banks, which will be pursued with the idea of taking into account that, owing to their size relative to a domestic market, certain banks can generate major systemic risk in a given country;  •  the finalisation of liquidity regulation, which must revisit the stress test scenarios applied to banks’ assets and liabilities as well as the scope of assets deemed to be liquid;  •  the adaptation of the French regulatory framework for all of the institutions that are currently credit institutions according to our national definition but which will lose this status under the new European definition, which is much more restrictive;  •  the overhaul of the banking crisis resolution mechanism, with the French mechanism – in anticipation of the forthcoming European projects – not having been updated to integrate the more powerful crisis management instruments resulting from the G20 guidelines;  BIS central bankers’ speeches  3  •  the deliberations, in both the European and French frameworks, about better organisation of banking activities and of the relationships between investment banking and retail banking. The ACP will ensure that there is coherence between these different initiatives so as to avoid any unanticipated negative impacts. *** Before handing over to Jean-Philippe Thierry, I would like to stress that, although the difficult macroeconomic context persists, I remain confident about the robustness of the French financial sector.
See Bernanke, Ben (2009), "The crisis and the policy response", speech at the Stamp Lecture, London School of Economics, 13 January, www.federalreserve.gov, for further discussion. (18) For a more detailed derivation and detailed discussion, see Svensson, Lars E.O., (2006), “Monetary Policy and Japan’s Liquidity Trap", working paper, www.princeton.edu/svensson. 8  BIS Review 19/2009  economy. Personally, I believe that the stimulation that the central bank can achieve in this way is very moderate, perhaps a few tens of basis points on the real interest rate in the best case. By influencing inflation expectations more directly, the real interest rate can be reduced by several percentage points. Monetary policy alternatives with a zero interest rate bound: concluding comments As both Japan and the United States now have a zero interest rate and several other countries are now cutting their interest rates close to zero, it is natural that monetary policy with a zero interest rate should be increasingly a subject for discussion and debate. The most recent Monetary Policy Report contains an article on monetary policy with a zero interest rate, and there is also an alternative scenario in Chapter 2 assuming weaker real economic development and a repo rate path that is at zero during part of the forecast period.

It is possible that the level of inflation can become negative and that we will thus see deflation in some countries. Deflation for a short period is not a major problem. We even had this in Sweden a few years ago. But if deflation is prolonged, and especially if inflation expectations fall and deflation expectations arise, the situation can become very problematic. The combination of very low policy rates, a weak real economy and the risk of deflation has thus revived the debate about how monetary policy can and should be conducted in the event of a zero interest rate bound. In the 1990s, Japan experienced a long period with a zero interest rate, deflation and, compared with previous decades, weak real economic development. The experience gained in Japan has stimulated extensive discussion and a great deal of research at universities and central banks on monetary policy in connection with a zero interest rate bound. At Princeton University, Ben Bernanke, Paul Krugman and I conducted research on this subject. 3 The Japanese experience and the research conducted on monetary policy with a zero interest rate are now topical again. For Sweden, a scenario with deflation and a zero interest rate is as yet not particularly likely. However, at the Riksbank we must of course be prepared for all eventualities and consider what measures would be possible and appropriate in such a situation. We must also think about how we can minimise the risk of ending up in such a situation.
Thereafter, references fell off a bit until rising sharply again recently. Clearly, the recent financial crisis has underscored the importance of financial conditions. Today’s paper makes clear the importance of financial conditions. The paper’s analysis of the many financial conditions indexes that have been constructed as proxies for overall financial conditions finds that many of these indexes have done better than the fed funds rate or other single-variable financial indicators as predictors of real economic activity. However, as the paper also makes very clear, the indexes that have been developed are still very rudimentary. In particular, most financial conditions indexes are ad hoc and incomplete. In their review of the existing financial condition indexes, the authors find considerable differences across the indexes in the way that they are constructed and in terms of the variables included. In addition, there is another difficulty. As the financial system changes over time, both in terms of structure and in terms of financial products, the financial variables that we might determine to be important are also changing. For example, in the wake of the recent financial crisis, the variables that the paper’s authors call “neoclassical” – such as the yield curve and stock market prices – appear to have become less important relative to the variables that the authors term “non-neoclassical” – such as quantity and survey measures of credit availability. Variables that would work best 10 years ago as forecasting tools may no longer be very useful.

William C Dudley: Financial conditions indexes – a new look after the financial crisis Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the annual US Monetary Policy Forum, University of Chicago Booth School of Business, New York, 26 February 2010. *  *  *  Thank you for having me to speak as a panelist today. As always my views are my own and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. I am glad that Narayana Kocherlakota is here as well as I don’t think I qualify as the most “objective” person to be a panelist on this particular topic. After all, I have long been a proponent of using a financial conditions framework to think about the economic outlook and monetary policy. When I was working as the chief U.S. economist at Goldman Sachs, we built one of the earliest financial conditions indexes, the Goldman Sachs Financial Conditions Index (GSFCI). I am going to divide my remarks today into two parts. First, I will discuss why a financial conditions framework is useful when thinking about the economic outlook and monetary policy. Second, I will discuss the paper, “Financial Conditions Indexes: A New Look after the Financial Crisis,” by Jan Hatzius, Peter Hooper, Frederic Mishkin, Kermit L. Schoenholtz and Mark W. Watson, in some detail – evaluating its considerable strengths and pointing out some areas where additional work would be useful.
MAS is stepping up efforts to promote greater public awareness of simple, low cost financial products as well as compareFIRST and DPI. 55. MoneySENSE, national financial education programme, is centrepiece of this effort. 56. MAS will continue to work with industry, schools, and other government agencies to enhance financial literacy among Singaporeans so that they can take sound financial decisions. •  Institute for Financial Literacy (IFL), a collaboration between MoneySENSE and Singapore Polytechnic, delivered over 1,500 talks and workshops to almost 50,000 working adults since its launch in 2012. •  MoneySENSE will partner schools in use of “gamification” to reach primary and secondary school students in fun and engaging way. 57. Last year, I asked for media’s help in our financial literacy effort. •  Heartened by media’s support, working with us, with industry, and on your own, to carry messages on financial education. •  We look to media’s continued support for MoneySENSE initiatives. Financial centre development Financial sector growth: broad-based and higher than overall economy 58. Financial services grew by 7.7% last year, compared to overall GDP growth of 2.9%. •  Since recovery from GFC, financial sector growth has outpaced overall economy. •  Sector grew by average 8.2% during 2011–2014, nearly twice overall economic growth of 4.2%. •  Growth has also been broad-based: across most business segments. 59.

Essentially an Asian growth story:  8  BIS central bankers’ speeches  •  Rise of Asian middle class and growing affluence has generated demand for variety of financial services, including wealth management and insurance  •  Growth of Asian corporates has driven demand for offshore lending, foreign exchange trading, capital market activities, and risk management. 60. Some highlights in past year:  •  Assets under management (AUM) rose by 30% from $ trillion in 2013 to over $ trillion in 2014. •  Foreign exchange trading, measured by average daily turnover volume, increased by 40% from a year ago to reach $ billion in October 2014. •  Offshore non-life insurance, measured by gross written premiums, grew 8.8% yearon-year to $ billion in 2014. •  Corporate debt issuance grew 13% in 2014 as outstanding debt reached $ billion. Infrastructure financing space becoming more active. 61. Singapore already serves as important infra financing hub, with 60% of infra financing transactions in ASEAN led by project finance teams based in Singapore. •  MAS working closely with industry to develop toolkit for standardised public-private partnership contractual clauses. This will: o  o •  enhance bankability of infra projects; and facilitate subsequent capital market refinancing  Aim in coming years is to enhance infra financing ecosystem: o o  Work with MDBs to increase supply of bankable projects Facilitate greater institutional investor participation in infra assets. RMB market has taken off well. 62  Singapore currently second largest offshore RMB hub in world.
Whether households will maintain that lower rate of saving, as in the MPC’s central forecast, remains to be seen – there must be a risk that consumption could adjust further. 9  Question: “How much has the result of the EU referendum affected the level of uncertainty affecting your business?” 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Chart 6: Consumption and income growth Per cent  3  Referendum  2 1 0 -1 Quarterly consumption growth Quarterly household income growth Dashed lines represent averages over the period  -2 -3 2000  2004  2008  2012  2016  Chart 7: Household saving rate Referendum  Per cent of income  12 10 8 6 4 2 0 2000  2004  2008  2012  2016  Why didn’t demand fall further following the referendum? One reason is that the fall in the exchange rate, while dampening consumption, will also have supported net trade. Another is the policy actions that were taken in response.

One thing we can use, is to look at how things have been before. The empirical national economist’s traditional method is to gather data, to structure data and to seek correlations between different economic variables. Data is gathered from history, the correlations found are historical ones. For me, traditional forecasting is all about using history in various ways to tell us something about the future. But of course it is not always the case that things behave in the same way as before. Sometimes developments take a new path, a path that we had not imagined. Spring 2020 was a good example of this. When the crisis came, history was not much help to us. Apart from being unexpected, each crisis is unique. The April Monetary Policy Report therefore did not present any forecast. Instead, it presented two scenarios showing two possible developments over the coming period. I consider that this was as far as we could go when we could not use history to help us. To me, it has been natural that monetary policy in recent months has been very much in the here and now. The problems arising required immediate measures. The measures taken have made monetary policy more expansionary. And we cannot rule out the possibility of setbacks. When we can once again interpret inflation statistics and when we can once again use history to say something about the future, monetary policy can also become more forward-looking than it has been in recent months.