samchain/econo-pairs-v1 huggingface dataset:
Before turning to the next issue — the problem of the poor countries’ large debts — let me summarise the discussion about the IMF, its lending operations and requirements. In my opinion, the criticism of the massive loans contains several grains of truth. Solutions are admittedly difficult to find when problems have already accumulated but a considerably stricter position at an earlier stage, together with greater transparency about the actual situation, could have resulted in a better policy. I am more hesitant about the criticism of conditions imposed on particular countries. There have certainly been mistakes — policy has, for instance, been constructed all too frequently on the premise of a fixed exchange rate — but even retrospectively, the answers are seldom as obvious as they are said to be. Macroeconomic policy in a crisis is almost always a question of arriving at the right balance between different alternatives. Poor-country debt A fourth area of problems in the debate on globalisation concerns the debts of the poorest countries. This is something that has not least engaged representatives of the Church, for instance in the context of the Jubilee 2000 campaign. It has been argued that the international community is not doing enough to tackle the debt problems of poor countries. I agree that the debt situation in many developing countries can hamper economic development, although a majority of the poorest countries also face problems of a more fundamental nature, for instance as regards internal institutional conditions.

Spain has recently introduced various reforms to improve the effectiveness of bankruptcy procedures, though it is still too early to appreciate in full what additional reforms are needed to further improve those procedures. At the European level, I also welcome the Action Plan on Building a Capital Markets Union recently approved by the European Commission. This project envisages some measures to overcome information barriers that could inhibit SME lending. That includes, following the Spanish example, the strengthening of the feedback given by banks declining SME applications and the promotion of systems facilitating the availability for investors of comprehensive information on SMEs. Moreover, the Action Plan also foresees actions to reactivate securitisations markets. Let me stress the importance of this specific set of measures. For smaller firms, for which direct access to markets is not feasible due to problems of scale, bank credit will remain the predominant financing source. Therefore, an adequate availability of funds for SMEs requires banks to have sufficient means and capacity to properly conduct their intermediation activity. In that regard, the development of the securitisation markets seems a promising avenue to facilitate credit risk management by banks and, therefore, to support lending. Indeed, securitisation markets activity was seriously impaired after the subprime crisis due to the stigma attached to any kind of asset-backed securities, and the lack of recognition by investors and regulators of the specific quality of each product.
The goals of monetary policy If one looks at the 10 years leading up to the onset of the crisis – which were also the first ten years of the Bank’s MPC – the outcomes for inflation and for aggregate economic growth in the UK were good. Inflation was – by historical standards – very low, very stable and close to the target. That had not been achieved at the expense of unusually low growth or high unemployment. In Ireland growth had been much stronger and inflation a bit higher. The aggregate outcomes looked good in both countries (Charts 1–4). In the UK there was a strong consensus that having monetary policy directed at hitting an inflation target was sensible and that it had been successfully implemented. BIS Review 133/2010  1  But if you now view the mess that we are dealing with after the financial crisis as substantially reflecting monetary policy decisions, you would take a completely different view of how well policy had been run. The charge is that policy in the UK was inappropriate given the huge build-up in many asset prices, and particularly in debt, or leverage. The fact that monetary policy could be very successful in terms of hitting an inflation target – and in the UK it was 1 – but not prevent a very serious financial crisis, and one that has been followed by much more variable inflation, is taken by many as a clear demonstration that the inflation-targeting framework is flawed.

Second, the entire path will be considered when assessing whether there are grounds for changing the horizon. We have also begun providing projections for a three-year period in the Inflation Report. If extraordinary conditions prompt Norges Bank to apply a different time horizon than two years, the Bank will provide a clarification of this. However, confidence and credibility in the conduct of monetary policy are necessary before taking such additional considerations into account. The greater the confidence in the inflation target, the larger the scope for stabilising the real economy. A rapid and pronounced change in the interest rate may be appropriate in cases where there is a risk that inflation might deviate considerably from the target over a longer period, so that inflation expectations might be affected or where heightened turbulence in financial markets or a cost-push shock resulting from wage negotiations indicates that confidence in monetary policy is in jeopardy. In Norges Bank’s Inflation Report, we present our forecasts for both inflation and the output gap in the same chart. The reason for this is that we want to be as transparent as possible concerning the tradeoffs made in our conduct of monetary policy. Transparency enhances confidence in and the understanding of monetary policy. This has been well received internationally, cf. the following quote  8  See for example Smets, F. (2000): “What horizon for price stability”, ECB Working Paper nr. 24, July 2000 and Svensson, L. (1997), “Inflation forecast targeting: implementing and monitoring inflation targets”, European Economic Review, 41, 6, side 1111-1146.
And the Bank now has a comprehensive set of market wide and bilateral facilities. These developments give the Bank tremendous flexibility to support financial institutions during periods of stress. As you will see from the FPC’s published record, it was in that context that the Bank decided to announce two additional ILTR operations in the event of a “yes” vote in the referendum on Scottish Independence, as a precautionary measure to backstop sterling market liquidity. As part of its contingency planning, the Bank assessed its ability to provide liquidity support to the banking system should it become necessary and concluded that the range of tools within the existing framework offered sufficient flexibility to respond. But the Bank is not standing still; we are continuing to develop our liquidity insurance framework to ensure that it can react to a wide range of liquidity challenges. First, as part of the strategy to broaden liquidity provision, the Bank has committed to consider the feasibility of offering Shari’ah compliant facilities. All banks must hold an adequate stock of liquid assets to meet prudential regulations and, as the most liquid assets in the economy are the reserves held by banks and building societies on account at the Bank, it would be beneficial to Shari’ah compliant banks to have access to our balance sheet. There are significant challenges to this work: for example, in designing a Shar’iah compliant deposit account which has similar economic properties to interest-paying reserve accounts and in identifying sufficient Shari’ah compliant collateral to support lending facilities.

Some of the products like the Letters of credit have been widely used in the emerging markets and some of the estimates indicate around 55% of all letters of credit to be related to export activities, indicating the relative importance of trade financing in export facilitation and growth performances. Trade finance is particularly considered to be important for SME, as an easy and chip access to financing, as it is structured and self liquidating. Despite the large importance and the low riskiness, the new Basel rules treat the trade finance in more conservative way, which might reduce the availability of trade finance, increase its costs and thus impair the export and growth  BIS central bankers’ speeches  3  prospects of the emerging markets. Albeit some amendments to the Basel rules in this area were done in October 2011, still there are views that they are relaxed asymmetrically, only for the importers, and as such they do not bring benefit for the emerging market exporters, where the problems might stem from. Longer-term infrastructure finance is also treated as important enhancer of the infrastructure project in the emerging economies, and crucial for enhancement of their structural competitiveness. The reforms of the regulatory framework, pose challenges in this respect as they might ask for a balance sheet rebalancing towards more liquid assets, which can reduce the availability of infrastructure finance.
At the same time, the labour market has been affected by changes both within the EU and in the world economy as a whole. Asia is rapidly expanding production and exports and reduced trade barriers are increasing the degree of competition even in markets that were not previously exposed to competition. The emancipation of the countries in eastern and central Europe has dramatically increased access to labour for manufacturing in these countries and also for work in Sweden. So far the temporary labour migration has been only a small, although growing, element in the Swedish labour market. However, the pressure from the labour supply from the new EU countries is bound to increase. The amount of foreign labour entering the various sectors will depend on the initial wage differences. The new member states’ wage levels are in the process of converging with Swedish wages in the long term, but it is dangerous to assume that neither wages nor employment in various sectors in Sweden will be affected. If we assume this, there is a risk that we will not be sufficiently willing to make changes and then unemployment will rise. The Swedish labour force is thus facing competition both directly from foreign labour coming here and indirectly through households and companies choosing to buy goods and now even services that are produced abroad. Phenomena such as offshoring and merchanting can also be linked to the relatively high labour costs in Sweden.

The Bank of Zambia and the Government are, therefore, most grateful to our cooperating partners for helping us build capacity in our financial sector. Honourable Minister, it is also our view that the FSDP provides a unique opportunity through its structures, operating on the principle of private-public partnership, to take responsibility for overseeing the development of the financial education strategy for Zambia. One of the key issues that this partnership should help address is achieving consensus on resource requirements for implementing financial education programmes and agreeing suitable funding models that can generate a stream of resources to support sustained provision of financial education over the long-term. Ladies and Gentlemen, It is now my pleasure to call upon the Guest of Honour, to give us his key note address and to officially open this workshop. Honourable Minister Sir. 2  BIS Review 139/2010
The use or misuse of forecasts has caused problems for both the Bank of England and the Met Office in recent years. The Bank’s forecasts of inflation were criticised for overstating the size of confidence intervals during the period from 1995 to 2007, the so-called “Great Stability”, and then understating them once the financial crisis occurred. And the Met Office has recently announced that it will no longer publish forecasts for the weather in forthcoming seasons after it “failed” to predict the cold winter or the wet summer (in some parts of the country) last year. The seasonal forecasts will be replaced by monthly predictions. In a statement, the Met Office said, “by their nature, forecasts become less accurate the further out we look. Although we can identify general patterns of weather, the science does not exist to allow an exact forecast beyond five days, or to absolutely promise a certain type of  BIS Review 36/2010  1  weather”. But to publish forecasts only when the outcome is virtually certain would be an admission of at least partial defeat. If descriptions of probability distributions are misinterpreted by the media or the public, how can we discover which messages are robust and which are too fragile to survive the process of communication to a wide audience? First, we need to consider how we should form a view of the likelihood of different outcomes. 2. Unpredictability in economics and science  Unpredictability is a challenge faced by practitioners in many disciplines.

For example, as regards operational risk and the so-called hybrid approach which sets out how the capital requirement for operational risk calculated as an aggregate using advanced models (AMA) can be distributed or assigned within a banking group - we as supervisors find ourselves in a situation where it would be advisable for us to take steps to clarify some aspects of this approach, but where we need the industry to make clearer progress in developing concrete assignment models. There are other eminently practical topics that are being discussed by the AIG. Without wishing to provide an exhaustive list, I would just like to mention that it is examining the material effect, in terms of capital, of the differences that continue to exist in some jurisdictions on subjects such as the definition of default. The Group is also engaged in an exchange of views on how to interpret “user testing” and so-called “LGDs in stress situations”. The AIG is attempting to establish the circumstances in which all these differences may be acceptable, when they affect different entities within the same banking group, and under what circumstances it would be appropriate to standardise the treatment of some of them. Another practical aspect of implementation relates to the growing use by a number of institutions of external models and databases, known as “vendor products”.
In addition to the provisions of the BFSA, there are a number of regulations in place that are aimed at enhancing corporate governance for the Financial Service Providers regulated by the Bank of Zambia, some of which are listed below;   The Prohibition and Prevention of Money Laundering Act of 2001 (PPMLA) and the Anti-Money Laundering Directives obligate the board of directors to formulate anti  BIS central bankers’ speeches  3  money laundering policies and ensure senior management implement these policies.   The Corporate Governance Guidelines for Financial institutions issued in November; 2006. These guidelines set forth a broad framework of fundamental corporate governance principles to guide the actions of the directors and managers of the institutions operating in Zambia. (Infact, in every letter authorizing the appointment of directors of financial institutions, the Registrar of Banks and Financial Institutions makes reference to these guidelines). Chairperson, we are also aware that the mission of the Institute of Directors is to ensure the highest professional and ethical standards amongst directors and the boards on which they serve. Similarly, the Bank of Zambia scrutinises all persons proposed for appointment as directors and senior management as a way of ensuring that only people who are credible, fit and proper are allowed to manage affairs of financial institutions. In cases where a serving director or senior manager of a financial institution falls short of the expected standards of conduct, the Bank of Zambia has powers to cause their removal from such positions.

Ladies and Gentlemen, another important safeguard relates to the requirement for financial institutions to have in place certain board committees such as the Audit, Risk Management and Loans Review Committees. This is intended to ensure independence, transparency and accountability to board oversight over management actions. All companies should strive to ensure that such safeguards are put in place for the effective oversight of management. Finally, allow me to congratulate the Institute of Directors for continually trying to improve professionalism and ethics in our corporate entities. This is commendable. I also wish to acknowledge the mutual cooperation that has always existed between the Bank of Zambia and the Institute of Directors. You will recall that the Institute of Directors conducted a number of seminars on core principles of corporate governance under the first phase of the Financial Sector Development Plan (FSDP). Similarly, it is our expectation that we will continue to work together under the second phase of the FSDP in the area of developing and introducing an ethics and corporate governance code for the financial sector. I Thank You For Your Attention  4  BIS central bankers’ speeches
Last year, the Topaz Solar Farm project in California was structured with a $ debt package featuring $ of bonds. Banks took the construction risks, and the loans were subsequently refinanced via bond issuances. In the Asian context, there may be additional considerations in refinancing bank loans via the capital markets, given the greater reliance on bank lending in this region. Project sponsors need to get more comfortable accessing the bond markets instead of relying solely on their relationship banks. Credit or risk guarantees provided by multilateral development banks or export credit agencies may also need to be adapted for use in the capital markets. Banks need to be innovative and develop a broader suite of financing instruments beyond bank lending in order to meet the financing needs of their clients. MDBs/ECAs are important risk mitigants and could explore new ways to make efficient use of their funds This brings me to the next point – the role of multilateral development banks, or MDBs, and export credit agencies in catalysing broader private sector participation. Given the scale of financing required for infrastructure, discussions at international fora have started to focus on how the multilaterals can further support the sector. For example, part of the G20 agenda for 2013 involves getting multilaterals to increase their lending capacity. Post global financial crisis, these entities have in fact stepped up and filled project financing gaps when bank liquidity is constrained.

I believe that the three following core activities of central banks can have a substantial impact on the environment for doing business: maintaining price stability, maintaining a safe and efficient payment system, and supporting the development of the financial sector. 2. Price stability  Let us first consider price stability. Low and stable inflation rates allow the private sector to plan for the future, lead to a lower need for costly price adjustments, prevent tax distortions  BIS Review 110/2007  1  and thus create a stable business environment. On the other side, high and unstable inflation creates random wealth transfers between creditors and debtors. Since their fiscal base is weak, governments in Africa have often relied on seignorage to improve their income stream, creating high inflation rates as a by product. How has inflation developed throughout the continent in recent years? Figure 1 depicts inflation in Africa from 1990 to 2005. It displays inflation in South Africa, as well as the median inflation rates in 39 other sub-Saharan economies and in 5 North African economies. I focus on the median inflation rate because this measure is not sensitive to large outliers such as Zimbabwe. As you can see, inflation in Africa has trended downward over the past 15 years, with the exception being the aftermath of the Tequila crisis in 94/95. In South Africa and northern Africa inflation is now well below 5%, while sub-Saharan Africa also displays single digit inflation rate.
As I mentioned earlier, the Central Bank left its policy rate unchanged on the last interest rate decision date, February 8. In December it raised the rate to 14.25%. This was the eighteenth hike since May 2004; prior to that, the policy rate had been held at 5.3% for more than a year. The Central Bank noted that its December hike seemed to come as a surprise. The introduction to Monetary Bulletin, which was published on November 2, stated that a reduction in the policy interest rate was still not in sight, in spite of substantially brighter inflation prospects. On the contrary, it was impossible to rule out a further policy rate hike in order to attain the inflation target within an acceptable timeframe, and the analysis presented then implied that there were still grounds for tightening the monetary stance further. However, the Board of Governors had decided to postpone such a measure for the time being. The next interest rate decision, to be announced on December 21, 2006, would be based on the analysis in the November Monetary Bulletin and additional data that became available by that time. The Chairman of the Board of Governors underlined this message from Monetary Bulletin in a speech a few days later when he described the decision to leave the policy rate unchanged on November 2 as a deferral of an increase rather than the end of the tightening of the stance.

And data support such outcome, here on a sample of emerging market countries. There is a strong positive relationship between quality of institutions and human capital on one side and growth on the other. Furthermore, in the context of new EU member states, countries with better institutions tend to withdraw more EU funds, which is another channel through which the government can help to increase the growth potential of a country. When it comes to quality of institutions, developments are not encouraging. If quality is proxied by World Bank’s Worldwide Governance Indicator, there has hardly been any convergence towards Germany, which can arguably be used as a benchmark. Notable exceptions are the Baltic countries where we have seen positive developments also in the aftermath of global financial 1/2  BIS central bankers' speeches  crisis. CEE countries also lag behind when it comes to the quality of human capital compared to those EU countries that achieve the best results in PISA test in Math and Science (Finland, Sweden, Austria, and Germany). Developments over time are also not encouraging as in many countries the PISA results have actually worsened during the last decade, which is a phenomena not confined only to the CEE region, but to the wider Europe. Such developments are on the one side worrisome, but on the other give us the opportunity to streamline and speed up reforms because potential gains can be substantial.