samchain/econo-pairs-v1 huggingface dataset:
Philipp Hildebrand: The independence of the Swiss National Bank Speech by Mr Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at Avenir Suisse, Zurich, 21 June 2011. *  *  *  The speaker would like to thank Peter Kuster for his support in preparing this paper. In addition, his thanks go to Rita Kobel Rohr for her helpful comments when drawing up the speech. Is the independence of the Swiss National Bank so extensive that it stands outside the reach of our democratic system based on the separation of state powers, on checks and balances? The topic of central bank independence is a matter of discussion beyond the borders of Switzerland. Around the world, a debate has started on the limits to power, in general, and the independence of central banks, in particular, and in some cases radical demands have been made.1 Because many central banks found themselves obliged to resort to large-scale unconventional measures during the financial crisis, it is not surprising that the debate is raging now. Central banks are indeed very special institutions. They hold the banknote-issuing monopoly and provide the domestic money market with liquidity. Consequently, they can never really be short of money. In Switzerland, the state has conferred the banknote-issuing monopoly on the SNB. This means that it always has the requisite means for meeting its obligations in Swiss francs. However, that does not stop it from making losses. As you know, the SNB had to report a large annual loss in 2010.

This broad flexibility within our statutory legislation (which came into force in 2004) proved to be a huge advantage during the crisis, also by comparison with other central banks. For instance, we were quickly in a position to issue our own debt certificates and develop a large market for them. We do not use these SNB Bills because we need money. They are used to absorb excess liquidity in the money market. Second, our independence is not unconditional. With the privilege and duty of independent action comes a particular responsibility. And whoever bears responsibility in our democratic constitutional state must be accountable for his or her actions, for the means chosen and the results achieved.6 Consequently, under article 7 of the National Bank Act, we maintain a regular exchange of information with the Federal Council, and the SNB and the Federal Council inform one another of decisions that will have a significant economic or monetary impact. This is important for us, because it ensures that we are familiar with the fiscal political framework within which we conduct our monetary policy. Nevertheless, each body retains full  4  Cf. also Message on the revision of the National Bank Act of 26 June 2002, FF 2002 6107 to 6109. 5  Together with the possibility of re-election, this helps to set the incentives for members of the Governing Board in a way that ensures that long-term fulfilment of the statutory mandate is also in their individual interest.
Figure 2: Gross O fficial Re se rve s 3,000  USD mn  2,500 2,000 1,500 1,000  2006P  2005  2004  2003  2002  2001  2000  500  It is useful to recollect that since moving to the “Floating exchange rate” regime in 2001, the gross official reserves have continued to increase except in 2004 when the country was hit by the sudden increase in oil prices. As of now, the gross official reserves have been sufficient to meet about 3 months of average imports in the recent years despite the rising expenditure on oil imports. We also note that according to the overall policy vision announced in the “Mahinda Chintana”, the Government’s commitment to reduce the budget deficit to a sustainable level in the medium term has been made clear. In that context, the fact that the total revenue during the first nine months of 2006 increased, and thereby led to an improved Revenue/GDP ratio is laudable. In addition, it was noted  BIS Review8/2007  3  that several measures were introduced by the Government to rationalise recurrent expenditure, especially adjusting domestic fuel prices to reduce the burden on the Government. Nevertheless, the Government has had to resort to borrowings from the banking sector to meet shortfalls in the face of many challenges, and in order to avoid such a situation in the future, it would be highly desirable to further improve the Revenue generation and collection process in 2007 and beyond.

*** To sum up, the global economy is on the recovery path although there is still a long way to go towards sound and sustainable growth. Reshaping of the banking and financial sector will definitely contribute in this regard and the contribution in the same direction is expected from the fiscal sector, too. The central banks worldwide have proven their flexibility, but the monetary policy must not be overburdened in the long run and should get back to its primary function. A sustainable growth needs sound policies and accelerating reforms towards building more competitive and more flexible economies. Ladies and gentlemen,  2  BIS central bankers’ speeches  I hope I have already triggered many issues to be discussed in details later on, during this conference. Considering the eminent keynote speakers that we have in the first session and the high quality research papers to be presented in the next sessions, I have no doubt that all together we will enlighten this complex “package” of issues related to the recovery in the aftermath of the crisis. Thank you so much for attending our conference and thank you for your attention! BIS central bankers’ speeches  3
If oil prices were to fall again, a number of off-shore investment projects would become unprofitable, with considerable spillover effects on other sectors of the economy. Unemployment would probably rise. We cannot eliminate that risk. Curbing the exploitation of oil and gas resources is not a feasible alternative. The abiding question is how to limit the vulnerability associated with increased oil dependence. Our main defence is to keep our own house in order. Norway must be poised to resist shocks to its economy. The fiscal rule for petroleum revenue spending is one defence mechanism. The petroleum fund mechanism and moderate and predictable spending of petroleum revenues over the central government budget contributes to enhancing economic stability. Reserves accumulated in the Government Pension Fund Global provide fiscal leeway in the event of an economic setback, as observed in 2008 and 2009. By limiting petroleum revenue spending to the expected real return on the Fund, we ensure that our petroleum wealth will benefit future generations. A balanced approach to revenue spending will allow future generations to share in the wealth also through the part that is spent on public investments domestically. Chart 11: Norwegian labour is expensive The spending of petroleum revenues also has another facet. It increases the cost of Norwegian labour. During upturns Norwegian companies have fared well, in spite of rapidly rising costs, thanks to efficiency gains and the rise in producer prices for their goods and services.

It confirms that the expansionary monetary policy cannot be maintained for the next three years because price stability will be compromised in the long term. However, a swift correction in monetary policy would be precipitate since the inflation outlook is still associated with downside risks. If these risks materialised, we could again be faced with the threat of deflation. The uncertainties relate to the global economy and to the level of recovery within the financial industry. These factors have persuaded the SNB to opt for a cautious stance, and it is leaving its monetary policy course unchanged for the time being. Strengthening the SNB’s equity capital On 4 December, the SNB Bank Council decided to strengthen the SNB’s equity capital by doubling the allocation to provisions over the next five years. This decision was prompted by the growth in market and credit risks in the SNB’s balance sheet (creation of the SNB StabFund and the increase in currency reserves). Given the high level of the distribution  BIS Review 167/2009  3  reserve and results expected for 2009, this decision should not pose problems in terms of the distribution of profits, in the amount of CHF 2.5 billion annually, up to the end of the period agreed with the Confederation and the cantons (2017). My colleague Thomas Jordan will address these aspects in more detail in his own introductory remarks. 4  BIS Review 167/2009
For example, there is a new, explicit liquidity standard to ensure that payments are made on time and in the right currency, and the cover 2 requirement for complex CCPs is much tougher than what came before it. •  They also provide greater detail and scope, including more detailed guidance with respect to CCPs and trade repositories (TRs). •  They are underpinned by a detailed disclosure framework, an agreed assessment methodology and a rigorous monitoring program to both promote consistency in how authorities have adopted and implemented the PFMI as well as, importantly, to promote consistency in outcomes. •  They provide greater harmonization to avoid regulatory arbitrage and race to the bottom behaviors. •  They include requirements and guidance for FMIs to implement their own viable recovery and orderly wind-down plans. As I see it, great progress has been made, but there is more work to do in a number of areas: •  Greater harmonization and better cross-border mutual recognition practices;  •  CCP recovery and resilience as well as coordination with other authorities to ensure incentives are aligned;  •  Appropriate incentives for CCPs so that the profit motive does not conflict with having a safe system that can absorb large shocks without destabilizing the financial system; and  •  Availability of data in TRs on a cross-border basis to facilitate the development of a more complete picture of market activities and emerging risks.

The development of new markets and instruments, for example credit derivatives, has also led to a broader risk spread than earlier. The improved diversification of risk is probably one of the reasons that world financial markets have coped with the stock market decline and the accounting scandals with limited damage to the wider economy. This is probably one reason why the downturn following the stock market decline in 2000 was considerably less pronounced than during earlier downturns. The new instruments spread risk, but do not eliminate it. Financial markets have become highly complex. This alone entails an operational risk, which is a challenge to participants and the supervisory authorities. BIS Review 16/2004  1  Increased trade promotes growth and lays a basis for prosperity. A number of Asian countries have experienced strong, export-led growth - Japan from the 1950s and several countries in Southeast Asia from the 1960s. In recent years, China has become an important player in international trade, and is now probably the world’s fourth largest trade nation. The Asian economies and the rest of the world have become more integrated. Technological advances and a sharp fall in prices in the IT and telecommunications sectors have exposed a number of services that were previously sheltered from competition from low-cost countries. EU enlargement this spring, with ten new members, is also influencing the division of labour in Europe. Implications for the Norwegian economy Intensified competition from Japanese and Korean shipyards had serious implications for Norwegian shipbuilding in the 1970s and 1980s.
But I am also convinced that expanding the effective size of Asian financial markets through greater integration across jurisdictions, can make our economies better able to absorb the volatility of international capital as effectively as the US and European markets. It is therefore heartening to observe that several initiatives for promoting the development of the financial markets in the region are bearing fruit. A notable example is the Asian Bond Fund (ABF) initiative championed by EMEAP central banks. The ABF has been created specifically to encourage the development of bond markets in Asian economies, with the ultimate goal to create an integrated regional market. In developing the ABF, we have achieved a few firsts, including the introduction of the first exchange-traded bond index fund in Asia, arranging for two Asian markets to allow exchange-traded funds for the first time, and opening up the renminbi inter-bank bond market for the first time to foreign investors. The process leading up to the launch of Asian bond funds has shown that cooperation between central banks in the region can successfully deal with a number of technical and conceptual issues, which bodes well for the further development of this initiative as well as potential initiatives in other areas of financial market development. The successful experience of ABF has laid a strong foundation for enhanced regional cooperation by central banks to promote financial integration in Asia. There seem to be at least three aspects in which further development of central bank cooperation may be useful.

Joseph Yam: East Asian financial markets - the next frontier Welcoming remarks by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the conference on "East Asian Financial Markets - The Next Frontier", Hong Kong, 22 June 2006. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to welcome you to this conference on "East Asian Financial Markets - The Next Frontier". It is also an honour for the Hong Kong Monetary Authority to be co-hosting this event with the World Bank to discuss the findings of its latest Regional Financial Sector Flagship Study and the future development of the financial markets in Asia. The World Bank has been very supportive of economic development in the region and I particularly welcome the focus in its recent work on financial markets. Here in Asia, considerable efforts have been made at the individual economy and regional levels to further develop our financial markets. Much remains to be done, however, so it is with great anticipation that I look forward to the discussions, conclusions, and recommendations that will emerge during the coming two days. The title of the conference, "East Asian Financial Markets - The Next Frontier" is, I believe, very fitting. Each part of it carries an important message. The focus on financial markets reminds us that a wellfunctioning financial system is increasingly important for economic development.
Which leaves us with the question: is that a price worth paying in order to avoid the fall-out when a bubble eventually bursts? And that leads us to the second judgement that underpinned the non-intervention doctrine. Prior to the latest crisis at least, many policymakers believed that the costs of allowing a bubble in financial markets to run its course were relatively small. Interest rates could always be cut after the event to “mop up” the damage. Blinder and Reis summarise the received wisdom beautifully in their review of the decision to loosen policy when the DotCom bubble burst: “If the mopping up strategy worked this well after the mega-bubble burst in 2000, shouldn’t we assume that it will also work well after other, presumably smaller, bubbles burst in the future?” The large and coordinated cut in interest rates at the start of this decade almost certainly contributed to the build-up of an ever larger bubble. So its not at all clear that the post-2000 mopping up strategy worked that well in retrospect – it just stored up more trouble for the future. And even if it did work well last time around, I hardly need to add that mopping up the fall-out from the latest crisis is stretching the world’s policymakers to the limit. It is evidently not safe to rely on being able to mop up after the crash. Lesson 6: Inflation targeting is necessary but not sufficient A more fundamental question is whether the Inflation Targeting regime itself needs to be rethought.

The system now processes over 4 million payments on average each month, representing roughly 1,000 billion euros daily, of which 43% are cross-border payments. These figures show a significant increase in the use of real-time gross settlements in the EU since the introduction of the euro;  •  the smooth functioning of the entire integrated organisation of the Eurosystem, in which the decision-making centre works in constant contact with the national central banks on the implementation of operations. The reasons for this achievement lie primarily with the in-depth preparatory work conducted over several years by the central banking community and private financial market operators. b/ Second, together with many other factors, this technical and operational success has contributed to the high credibility of the single monetary policy, which is guaranteed, inter alia, by the independence of the European Central Bank and of the national central banks. The Eurosystem has inherited the store of confidence that was built up over several decades by the national central banks in charge of the most reputable currencies. In France for example, the last  BIS Review 11/2001  1  opinion survey indicated that 80% of French citizens trust the Banque de France. And the level of confidence in Spain towards the Banco de Espana, or in the other countries participating in the euro area towards their respective NCB, is certainly as high. Moreover, and contrary to what is often said, the monetary union of Europe is not starting from scratch.
At the present time there is no conflict between our employment objective and our inflation objective, as I expect inflation to be at or below our 2 percent longer-run objective over the coming years. But shouldn’t we also consider the costs associated with a more aggressive monetary policy of the kind adopted at the last FOMC meeting, especially when we are using non-traditional monetary policy tools? Absolutely. We have carefully evaluated three potential sets of costs and will continue to review them. The first set of costs stems from the risk that the current monetary policy regime could distort asset allocations and lead to renewed financial asset bubbles. We look at this issue on an ongoing basis. To date, there is little evidence of problems or excesses, but this could change as the recovery proceeds. If these costs were to rise, we would need to examine what steps could be taken on the macro-prudential front in response. Also, such developments would need to be incorporated into the monetary policy decision-making process. The second set of costs stems from the risk that exit from this regime could prove difficult. In particular, some observers worry that the expansion of the Federal Reserve’s balance sheet could ultimately prove inflationary. If that were the case, then I would regard the costs as exceptionally high. Fortunately, I am confident that such fears are misplaced. That is because we now have the ability to pay interest on excess reserves (IOER).

Sometimes, inflation has been a bit higher than expected, other times a bit lower. On balance, inflation has been very close to our 2 percent longer-run objective. BIS central bankers’ speeches  1  Although I have focused on the private forecasting record here, the FOMC participants’ forecasts show a similar pattern. It is on the growth side where there have been chronic, systematic misses. In my view, the primary reason for the poor performance of the U.S. economy over this period has been inadequate aggregate demand. There are several explanations for this. Although some were well-known earlier, others have only become more obvious as the recovery has unfolded. One reason is the nature of economic recoveries following financial crises. On that basis, the poor performance of the U.S. economy is not unusual – historical experience shows clearly that recoveries following financial crises typically are very slow and difficult.1 During the credit boom, finance is available on easy terms and the economy builds up excesses in terms of leverage and risk-taking. When the bust arrives, credit availability drops sharply and financial deleveraging occurs. Wealth falls sharply, precautionary liquidity demands increase, desired leverage drops further. In the U.S. case, there were some idiosyncratic elements, such as subprime lending and collateralized debt obligations. But, in the end, the U.S. experience included the major elements of most booms: Too much leverage, too little understanding of risk, too easy credit terms, and then a very sharp reversal.
10  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  10  Chart 7: Guidance has reduced the correlation between economic uncertainty and interest rate volatility Economic uncertainty and option-implied volatility of 3 month rates, 1 year ahead  3m rate standard deviation 180 160  2000-August 2013  140 120 100 80 60 40 August 2013 EU referendum  20  EU referendum - latest  0 -2  -1  0 1 2 3 Economic uncertainty (deviations from average)  4  5  Sources: Bloomberg Finance L.P., ICE, Bank calculations and Haddow, A, Hare, C, Hooley, J and Shakir, T (2013) “Macroeconomic uncertainty: what is it, how can we measure it and why does it matter?”, Bank of England Quarterly Bulletin, 2013 Q2.. Liquidity and lending facilities I would also like to touch on the critical but sometimes underappreciated role that liquidity and lending facilities have played in securing the recoveries in both our economies. During the crisis and its immediate aftermath, the focus of these innovations was to maintain market functioning. At the first signs of tension in 2007, the ECB was quickest to respond to demands for additional liquidity, injecting additional reserves in August as asset-backed commercial paper markets dried up. As the crisis intensified, the ECB launched innovative long-term repo operations, with wider collateral eligibility.

Macroprudential is no longer the policy that dares not speak its name. To safeguard these hard-won reforms, Europe now has a Single Supervisory Mechanism and European Systemic Risk Board. The Bank of England now houses the Prudential Regulation Committee and the Financial Policy Committee. The independence of these committees and their accountability to the people they serve through their respective parliaments are essential bulwarks against the inevitable recidivism that follows a financial crisis. The longer we go without disruption the more important it is to remember, remember that when it comes to financial stability, success is an orphan. Since the crisis, macroeconomic outcomes have been much less benign. Growth in both the euro area and the UK has been, on average, a percentage point lower; and inflation has been twice as volatile. There has been a persistent margin of spare capacity, with unemployment, on average, 1-1½ percentage points higher. But there have also been important differences. While the euro area has continued to experience ‘divine coincidence’ the UK has not (Chart 1). In the euro area, inflation has averaged half a point below target, reflecting in part the drag from persistent slack in the labour market. In contrast, UK inflation has been above target, averaging 2.3%, during a period where the economy was operating well below potential. That reflects the inflationary impacts of two large exchange rate depreciations and weak productivity that have offset a major positive shock to labour supply.