samchain/econo-pairs-v1 huggingface dataset:
Lars Nyberg: The framework of modern central banking Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at a Conference on Reforming the State Bank of Vietnam, Hanoi, 21 March 2006. *  *  *  Thank you for inviting me to this conference on reforming the State Bank of Vietnam. I imagine that one reason why I have been invited here is that the central bank I represent, Sveriges Riksbank in Sweden, just over a decade ago was in a situation which resembles the one the State Bank of Vietnam is experiencing now. At that time we had reached a situation where there were strong reasons – if not imperative ones – for reconsidering the way in which we used to think about monetary policy. It became clear that a reform of monetary policy and its framework was both desirable and necessary. Of course, Sweden is by no means the only country where monetary policy has undergone major changes in recent times. The view of how best to conduct monetary policy has changed fairly radically over the past twenty years and this has been reflected in a more or less worldwide reform process. What I hope to be able to contribute here today – as an introduction to the discussions – is to provide an overall picture of the ideas that formed the basis for this process and to describe what are today considered to be the guiding principles for a modern central bank, according to established research and practical experiences.

BIS Review 52/2006  5  optimism regarding the role monetary policy can play in long-term real economic growth was one important reason why inflation was so high during the 1970s. The value of independence How can one then construct a framework for monetary policy that provides the central bank with the best possible conditions to carry out its tasks? Here I intend to be fairly brief as this is something that will be discussed in more detail in the next contribution to this conference. Let me just note that there is currently general agreement that the central bank should be given the opportunity to work independent of the political system in order to attain the objective of price stability. It has been observed that if monetary policy is conducted at arm’s length from party politics, there is greater confidence in the price stability objective. This is linked to the fact that there has often been a tendency for politicians to use monetary policy for more short-term purposes which have conflicted with the long-term price stability objective and which have often entailed loosening the nominal anchor. Making the central bank independent is probably the element of the past decades’ monetary reform process that has triggered the most debate and has been perceived as the most controversial. It is probably natural for politicians to feel uncomfortable giving the central bank increased independence as it unavoidably means that they give up some of their decision-making powers, and moreover in a field perceived to be central.
In a multi-country FSAP you must give increased emphasis to the cross-border weaknesses and channels in addition to the domestic ones. A regional FSAP might include an analysis of efficiency aspects. The financial system may be robust but is it efficient? It is possible to regulate a financial system to ensure a very low level of risk, but the cost in terms of reduced efficiency may not be worth the gain. But on the other hand, the cost of a crisis can be so large that building adequate prevention makes good sense. A reasonable balance must thus be found between on the one hand efficiency and on the other hand the degree of regulation and the ways to implement it. Conclusion The whole FSAP process, which uses large resources in manpower and financial costs, was created to meet a specific purpose: to reduce the incidence of financial sector problems. It is as yet too early to prove whether this goal has been met. It is a fact that there have been fewer cases of major financial crises since 1999, when the FSAPs started, but this might also be attributed to the fact that global economic development has been generally positive during this period. It is also a fact that compliance with preconditions and with regulatory standards has improved since the FSAPs started – as an important example, the minimum capital ratios for banks have increased globally. However, we can all see that much remains to be done worldwide, including in our own countries.

It has steadily established a reputation as the leader in executing the € capacity-building initiatives through the development of skills, and expertise. MII has continued to broaden and enhance its training directory to meet the increasingly complex and diversified needs of the insurance industry. T he Registered Financial Planner (RFP) programme which was launched in 2002 has now produced its first batch of 964 graduates in January 2005. In keeping pace with the evolving changes in education, in July 2006, MII launched its MII e-Academy, an on-line learning avenue to make learning more accessible to the insurance professionals, unconstrained by location, distance or time. I am pleased that MII has taken the necessary steps in upholding the responsibility to deliver quality training, not only for the local insurance industry, but also across the region. The increasing number of participants from abroad signifies the growing recognition of the programmes organized by MII. At the regional front, MII's out-reach has been further enhanced with the conclusion of the Memorandum of Understanding between MII and FORTE Insurance ( Cambodia ) Plc. in June 2005, whereby MII will conduct professional insurance examinations in Cambodia . At the same time, MII continues to assume its role as the secretariat of the ASEAN Insurance Training and Research Institute, or AITRI, in Malaysia , serving as a regional network centre for insurance education and research. For this purpose, AITRI conducts an annual series of insurance programmes and courses for the ASEAN regulators and practitioners.
So far, measures adopted in the context of the CMU initiative, albeit positive and helpful, are not yet commensurate with the ambition of the project. With CMU, we should aim to reach a situation where both issuers and investors enjoy the same basic legal rights concerning capital markets activity regardless of the EU country where they are located. The CMU project involves all EU member states but it is particularly important for the euro area member countries. It is a big waste to have taken the huge step to adopt a single currency and continue to forgo the benefits that could be reaped by creating a true banking and capital markets union. I believe that euro area countries should forge ahead in enhanced co-operation in order to achieve CMU more rapidly. We should however, be well aware that CMU requires a European safe asset, the harmonisation of taxes on financial products, a convergence of company law, including on bankruptcy, the 6/9  BIS central bankers' speeches  creation of a single rule book of regulation for markets activity and ultimately a European Single Securities Market Supervisor. The other big condition is a rock solid monetary union so that assets’ risks and returns are not significantly influenced by redenomination risk but exclusively by their idiosyncratic features. A heavy toll, I know, but I will believe that the CMU project is possible when I see authorities start making inroads in some of those difficult issues. Thank you for your attention.

11  The FSF was established by the G7 finance ministers and central bank governors in 1999 to promote international financial stability through enhanced information exchange and international cooperation in financial market supervision and surveillance. 12  Financial Stability Forum, 2007. 13  The Counterparty Risk Management Policy Group II (CRMPG) is comprised of senior officials from major financial institutions. 4  BIS Review 74/2007  As mentioned above, I do not see HLIs as a direct threat to financial stability. The Achilles heel of the system is the link between HLIs and banks of systemic importance. Thus, the systemic risks originating from HLIs are better addressed through indirect measures aimed at the HLIs' counterparties and creditors, which are mostly large international banks. This has the advantage that best practice guidelines are focussed directly on the transmission channels through which the risk would be propagated and on the institutions which are cornerstones from a financial stability perspective. An example of guidelines for the counterparties and creditors of HLIs is the May 2007 report by the FSF. The FSF published recommendations to address potential financial system risks relating to HLIs. The focus of the report is clearly placed on systemic risks. Investor protection issues associated with institutional or retail investments in HLIs are not addressed. The aim of the two most important FSF recommendations (no. 1 and no. 2) is to mitigate the two transmission channels discussed above: First, core intermediaries – i.e.
Population that is used to change, reform and transformation. Malaysia is no stranger to change and reform. Our people are very adaptable. We used to be a primary commodity producing economy in the 1960s and 1970s, before embarking on import substitution and then manufacturing. In merely two decades, we have transformed from an agricultural economy to a manufacturing powerhouse. Since the Asian Financial Crisis, we have metamorphosed the economy from an export dependent to a domestic driven economy. And now, Malaysia embarks on a journey into high-value growth activities. We are confident in achieving our quest to be a high income nation with equity. Today, Amazon has steadily nudged out physical retailers, rendering them almost-obsolete at retail outlets. Soon, checkout counters would seem as foreign as cassette tapes to our millennials. While driverless cars seems to be the “in” thing now, it is quite possibly, just the start to many more changes that we cannot even fathom now. Against these changes, the ability to learn, unlearn and re-learn would be an indispensable requirement. There are many lessons to be learnt. One of these lessons is that we need to prepare society for jobs that do not yet exist. Students of today can expect to hold more than 11 jobs between the ages of 18 and 42. That is more jobs than most of us have ever. With automation and artificial intelligence on the verge unleashing many possibilities, our value proposition is not knowledge, but cognitive skills.

As I noted earlier, while the Code is not a set of rules, nor is it regulation, support for the Code and its principles is central to achieving its goals. With that in mind, I would like to turn now to the Statement of Commitment that was developed alongside the Code, talk about steps the New York Fed itself is taking, and then touch upon some of the industry measures underway to support adoption. The Statement of Commitment was developed and appended to the Code to provide a standard tool by which an institution may—on a voluntary basis—demonstrate its commitment to the principles of the Code. The Statement of Commitment provides that an institution is an FX market participant and has reviewed the Code. By using it, an institution acknowledges the principles as reflecting good practice and exhibits a commitment to conducting that institution’s activities in a manner consistent with the Code. The Statement, like the Code itself, acknowledges that market participants vary by size, complexity and nature of activities, and that diversity should be reflected in the steps they may need to take for adoption and adherence. Central banks, similar to FX market participants, are committed to the Code’s adoption as well. Following its publication, BIS central bank governors expressed their support for the Code by noting that central banks “are strongly committed to supporting and promoting adherence to the Code.
First, the Chinese transition to a more balanced growth path appears to be underway – with stronger consumption and less emphasis on investment. And the Chinese authorities have a range of tools available to support their economy during this transition. Second, despite the intense strain placed on many emerging market economies by the substantial deterioration in recent years in their terms of trade, this stress does not yet appear to have led to the type of financial system breakage that might lead to widespread contagion and large capital flow reversals. In fact, in recent weeks, emerging market equity markets have recovered substantial ground and many countries’ currencies have stabilized. It is also important that the forward momentum in the jobs market persists. The August and September employment reports raised some concerns that the U.S. labor market might be faltering. Those concerns should be at least partially put to rest given the strength of the October employment report, recognizing that the employment news can be volatile on a month-to-month basis. Most noteworthy to me are the strong payroll employment gains in October and the solid 0.3 percent rise in aggregate hours worked. Over the past three months, payroll gains have averaged 187,000 per month, not much below the average payroll growth of 213,000 per month during the first half of 2015. We are now much closer to our goal of maximum sustainable employment than at the start of the year.

As you may be able to infer from my earlier remarks, I think it is quite possible that the conditions the Committee has established to begin to normalize monetary policy could soon be satisfied. In particular, I will be evaluating the incoming information to see if it confirms my expectation that growth will be sufficient to further tighten the U.S. labor market. After lift-off commences, I expect that the pace of tightening will be quite gradual. In part, that is because monetary policy is not as stimulative as the low level of the federal funds rate might suggest. There is strong evidence that the short-term neutral real interest rate – let’s call that r* – is currently quite low, certainly below the level that historically has applied on a longer-term basis. 1 A wide range of models suggest that the short-run real r* is currently around 0 percent, far below its historical longer-run level that is estimated to be about 2 percent. 2 This benchmark “neutral” rate needs to be compared to the actual real federal funds rate. If we measure the latter by subtracting the core PCE inflation rate from the nominal federal funds rate, the actual real federal funds rate is slightly below –1 percent. Thus, current short-term real interest rates are not far below their neutral counterparts, suggesting that the current monetary policy stance is not exceptionally stimulative. The notion that r* is currently very low is also evident by more casual empiricism.
If we can move to a position where sufficient and appropriately committed loss absorbing capacity is in place on a global basis in order for these groups to deliver outcomes for both home and host supervisors, then we will be better able to realise the benefits of international banking – and to do so safely. In conclusion, international banking benefits the global economy. However it carries risks. And because of their cross-border nature, international banks are inherently harder to supervise due to the risk of duplication and gaps. There is in addition a danger of international banks being supervised sub-optimally in a balkanised manner. As the largest host supervisor globally by many measures, the UK is more exposed to these risks than most. In my view the best approach to try to tame these risks is to act globally, through committed cooperation between home and host supervisors. We can get to the point where we are not in fear of international banking, and that the risks that it brings are appropriately managed – just like a lion tamer controlling their lions – and under control. As host supervisors we are committed to playing our part in global consolidated supervision and resolution of international banks. This supports international banking and flows of capital – and supports a strategy of being “open for business” as long as it is safe. BIS central bankers’ speeches  7

We are starting from a good position. BIS central bankers’ speeches  3  •  To quote the KPMG report on Singapore’s payment landscape, “the underlying infrastructure is world-class”  •  And Singapore has one of the highest smartphone penetration rates in the world and wireless internet access is pervasive. Yet, our payments preferences remain largely paper-based: cash and cheques. •  For consumers, the use of cash for daily payments is high. •  For businesses, the use of cheques is relatively high. As pointed out by the KPMG report, “consumer payments in Singapore are unique among highly developed economies”. •  Cash in circulation in Singapore is 8.8% of GDP, compared to 4.4% in Australia and 2.12% in Sweden. •  12.7 cheques per person were written in Singapore in 2014, compared to 7.1 in Australia. •  In Sweden, the total number of cheques issued is so small that it is effectively zero on a per person basis! The economic cost of this heavy reliance on cash and cheques is not trivial. •  Our studies, conducted together with KPMG, estimate that the social costs of cash and cheques is around 0.5% of GDP, or about $ billion per year. •  A good part of these costs can be attributed to the cost of securing cash, both in transit and in storage, and processing cheques. The encouraging thing is that a growing number of our consumers and businesses would like to move towards e-payments. •  The infrastructure is there.
Rates of infant mortality have fallen by th  8  40 percentage points since the end of the 18 century. The estimated lifespan of a human has risen by a 9  factor of over two. And estimated male skeleton heights have risen by 5-10cm. 10  Humans have grown,  financially and physiologically, in lockstep. The world has moved from a Malthusian Era to a Golden one. 5  Stiglitz, Sen and Fitoussi (2009). For example, Clark (2009). 7 Malthus (1798). 8 Our World In Data: https://ourworldindata.org/child-mortality 9 Our World In Data: https://ourworldindata.org/life-expectancy 10 Haldane (2015a). 6  3  All speeches are available online at www.bankofengland.co.uk/speeches  3  A Story with One “i”  What explains this extra-ordinary inflexion point in the history of economic growth and living standards? So fundamental is this question to so much of social and economic history that, understandably, it has attracted huge amounts of empirical, historical, social and theoretical research. Out of this cloud of evidence, a clear sunbeam of understanding has emerged about the deep causes and catalysts of economic growth. th  If you ask a schoolchild what happened in England around the middle of the 18 century, as I often do, many will give you the right answer. It marked the dawn of the Industrial Revolution. But what exactly was this a revolution in and what exactly caused it? In the standard account, the catalyst for this revolution in economic growth came from a single source, from one “i” - ideas.

What the UK may lack is some diffusion spokes to accompany these innovation hubs – spokes that could help spread new and existing technologies, new products and practices to the long and lengthening lower tail of companies. To be successful, these spokes would need to be repositories of knowledge and expertise on technologies and their application to companies. And, ideally, these repositories would have regional and sectoral reach to enable them to touch the long tail. The UK’s existing university network would be one institutional solution to this spoke problem. They have regional and sectoral reach. They also have embodied expertise and knowledge. By working in partnership with local businesses, they could serve as repositories of expertise on good company practices – in management, organisation, logistics, robotics, AI and the like. A new set of business parks attached to these universities could serve, not so much as innovation incubators for new companies, but as diffusion clinics for existing ones. This idea goes with the grain of the earlier proposal; it would broaden the scope and purpose of universities. In future, these would develop a broader set of capitals – beyond human capital (in people) to include physical and intellectual capital (in firms). And they would do so throughout the lifecycle of companies, not just in their early years. As it happens, this would also be consistent with Newman’s original conception of universities as diffusion-engines, every bit as much as innovation-engines.
2 It was on the whole greater than during the recessions at the beginning of the 1990s and 2000s and, above all, it lasted longer this time. Statistics regarding this are only available from 1995 for Sweden, but they nevertheless show  1  See the article “Policy expectations and policy evaluations: the role of transparency and communication” by Lars E.O. Svensson in Sveriges Riksbank Economic Review no.1 2010 (p. 62). 2  This applies regardless of whether one calculates the uncertainty in terms of standard deviations in the forecasts, or the difference between the highest and lowest assessment. 2  BIS Review 65/2010  that the uncertainty rose rapidly and was high in Sweden during the most recent financial crisis. In recent months the uncertainty that can be measured in the CF has declined somewhat with regard to the United States and even more with regard to Sweden, where it has returned to the historical average level. If one does not have anything else to go on, a forecast can be based on what is known as an autoregressive model. What this means is a model where the forecasts for a variable are solely dependent on its earlier outcomes and a random error term and where one assumes that the variable tends to return to a normal level according to historical patterns. However, forecast evaluations carried out by the Riksbank show that on average there is an added value in making active and more sophisticated forecasts for at least up to 1–1 ½ years ahead.

This means that the different opinions must instead be brought together into a compromise as far as this is possible. The Monetary Policy Reports and Updates that we publish can thus be said to reflect the average stance of the members of the Executive Board. If one or more of us considers that the opinions expressed in the Report or Update differ too much from our own opinion to be able to express support from them, we must enter a reservation at the monetary policy meeting. We have, of course, also had the opportunity to put forward any dissenting opinions during a number of earlier meetings. When a member of the Executive Board enters a reservation at a meeting, it therefore rarely comes as a surprise to those initiated in the  BIS Review 65/2010  5  forecasting process or to the rest of the Executive Board. Most of the Executive Board members believe that they know roughly how their colleagues on the Executive Board will vote at the actual meeting. This is usually true, according to the conclusions of a study made by the Monetary Policy Department, and which is based on a questionnaire sent to all current and previous members of the Executive Board. 8 The reservation and motivation are published after the monetary policy meeting, in the press release and in the minutes of the meeting.