samchain/econo-pairs-v1 huggingface dataset:
Jan F Qvigstad: On institutions – fundamentals of confidence and trust Speech by Mr Jan F Qvigstad, Deputy Governor of Norges Bank (Central Bank of Norway), at the Norwegian Academy of Science and Letters, Oslo, 12 November 2013. The text below may differ from the actual presentation. This speech does not contain assessments of the economic situation or current interest rate setting. *  *  *  I have received valuable assistance in drawing up this speech, in particular from Mike Bordo, Arne Jon Isachsen, John Llewllyn and Anders Vredin outside Norges Bank, and from Norges Bank staff; Øyvind Eitrheim, Amund Holmsen, Marie Norum Lerbak, Inka Rogne, Øystein Sjølie, Birger Vikøren and Jan Fredrik Øksendal. I would also like to thank Helle Snellingen for the translation into English. Institutions The concept institution has many meanings. For example, there is an important distinction between its meaning as an abstract concept and as a concrete one. The judicial system in Norway is an institution in an abstract sense, while the Supreme Court is concrete. The Norwegian Opera & Ballet is a concrete cultural institution within our more abstract cultural heritage. In my own field, the monetary system is abstract whereas Norges Bank is concrete.

What where the options facing the authorities? At that time, the official view was that the banks were solvent but faced a foreign currency liquidity problem. Their published CAD ratios were well above the 8% limit, and as late as August  2  My former colleagues at the BIS have been doing important research in this area, see, for example, McGuire, Patrick and Goetz von Peter (2009). “The US dollar shortage in global banking and the international policy response”, BIS Working Papers, No. 291; Baba, Naohiki, Frank Packer and Teppei Nagano (2008). “The spillover of money market turbulence to foreign exchange swap and cross-currency swap markets”, BIS Quarterly Review, March, 73–86; and Baba, Naohiki and Frank Packer (2008). “Interpreting deviations from covered interest parity during the financial market turmoil of 2007–08”, BIS Working Papers, No. 267. 2  BIS central bankers’ speeches  2008, the Icelandic Financial Supervisory Authority had deemed them able to withstand severe capital shocks. Now, however, we know that this was probably not truly the case. Even if they had been solvent in the sense that equity was positive, in the aggregate they were below the 8% threshold when corrected for “weak” capital in the form of equity financed by lending from themselves. Furthermore, we know that, over time, an unchecked liquidity problem will turn into a solvency problem.
William C Dudley: The US economic outlook and implications for monetary policy Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the People’s Bank of China-Federal Reserve Bank of New York Joint Symposium, Hangzhou, Zhejiang, 29 February 2016. *  *  *  Thank you, Deputy Governor Zhu, for the opportunity to speak at this inaugural People’s Bank of China and Federal Reserve Bank of New York 2016 Joint Symposium. It is a wonderful occasion for our two central banks to meet and share ideas on important global macroeconomic and monetary policy issues. It is especially satisfying to me to be here in Hangzhou to see the result of my discussion last February with Governor Zhou about this kind of policy and research exchange. I thank you and the staff of The People’s Bank of China for developing this idea into such an ambitious work agenda, and for assembling such a distinguished group of contributors and participants for this symposium. We at the New York Fed look forward to future collaborative efforts to strengthen the relationship between our two institutions, especially given the key roles that China and the United States play in the global economy. By working together I believe we can achieve better outcomes for our countries and for the global economy.

Furthermore, several European reforms currently under discussion have the same end goal of increasing transparency and data disclosure in order to improve market discipline and ensure that capital is allocated more efficiently. Thus, the Corporate Sustainability Reporting Directive (CSRD) will require large companies to publicly report on the alignment of their activities with the taxonomy from 2024 onwards. Likewise, we hope that a European regulation establishing a label for green bonds (EuGB) will be adopted by next summer. This voluntary label is expected to have stringent requirements, which will help to build confidence: proceeds from the bonds will go towards funding activities designed to achieve six environmental goals; ex ante and ex post transparency requirements will make it possible to assess the environmental impact of the funds raised; and most importantly of all, an external reviewer must 4/6  BIS central bankers' speeches  check that bond issues are compliant with environmental requirements. This reviewer must be a legal person that is registered with the European Securities and Markets Authority and, as such, subject to supervision modelled on that of credit rating agencies. In addition, the proposed CRD6 Directive provides supervisors with new means to integrate environmental, social and governance (ESG) risks in supervision, through the harmonised development of stress testing methodologies. The European Banking Authority (EBA) has also been tasked with exploring the question of including ESG risks in regulatory requirements, although persistent conceptual difficulties make calibrating these tools a tricky business.
The general impression among financial agents seems to be that a repo rate increase is probable some time in the coming winter. The timing of a change in the monetary stance is determined by the Riksbank’s assessment of inflation. The simple rule of thumb for the Riksbank can be formulated as follows: if the assessment of inflation, given an unchanged instrumental rate, points to a rate of inflation one to two years ahead that is in line with the target, then the monetary stance is well balanced. If the assessment indicates a risk of inflation rising above (falling below) the target, then the monetary stance is too expansive (contractive) and the repo rate should therefore be raised (lowered). The time has not yet come for an increase in the repo rate, but when it does, our action will hopefully be seen as a natural ingredient of a monetary policy for price stability. Our ambition is to take predictable and timely measures so that sizeable interest rate movements can be avoided. Still, it is hardly surprising that the direction of monetary policy is being discussed. At present Swedish monetary policy’s overall impact can be described as expansionary at a time when activity is becoming stronger. The short-term real interest rate is between 2 and 2.5 per cent, depending on the exact maturity and how inflation expectations are measured.

TCW index and expected growth difference against other countries 1.5 1.0  140 Sweden - TCW countries difference expectations/growth  135  TCW index  0.5  130  0.0  125  -0.5  120  -1.0  115  -1.5 110 Mar-96 Nov-96 Jul-97 Mar-98 Nov-98 Jul-99 Mar-00 Nov-00 Jul-01 Sources: Consensus Forecast and The Riksbank  In the more recent discussion in the media and on the markets, attention has focused on more specific flows. This discussion is not always completely accurate. One reason for this is that it is not the individual flows, but rather the complete picture including all of the flows, various currency strategies, etc. that determines developments. We have little knowledge of the extent to which the players in the economy take exchange rate positions when they buy and sell various types of securities. We know from financial theory that large fluctuations in financial prices can often occur without any connection to large flows. Concern about the government finances can hardly have been a crucial factor in the latter 1990s. Neither is it probable that the short-term interest rate differential played a sizeable part, though an effect at times cannot be ruled out. In the more recent discussion, attention has focused on more specific flows. There were periods last year, for example, when the paths of the Stockholm stock exchange and the Swedish krona were rather closely related. It looks as if the krona tended to fall when foreign investors quit the market.
This both can and must conceal considerable differences between sectors and regions. The wage formation system must achieve something better than a result for the economy as a whole which is commensurate with average inflation and productivity. If we want low unemployment and price stability, wage outcomes must be adjusted to productivity in different sectors of the economy, indeed to the situation in individual enterprises and to different individuals. The design of pay systems and pay determination is also crucial to the distribution of resources and thus productivity and economic growth. In other words, higher productivity can create more scope for wage increases, but a functioning wage formation system can also help to improve productivity. Sweden’s success in this area in the next few years will depend both on the measures taken by Parliament and the Government and on management and labour. Parliament and the Government establish the framework for the functioning of the labour market and wage formation. A more expansive financial policy would make the task of management and labour and of monetary policy more difficult in the next few years. The legal framework, for example the rules on industrial disputes, is another factor. Tax and benefit systems are important and affect both wage formation and the behaviour of private individuals, ie their willingness to find work, move, etc.

Almost exactly a century ago, the outbreak of the First World War brought this incredible period of prosperity to an end. It would take almost half a century for it to start to be rebuilt and another 30 years before it fully gathered steam. 2  David Hume, “Of Commerce”, Selected Essays, Oxford University Press, 1993. BIS central bankers’ speeches  3  Now globalisation is again under threat with the financial crisis raising the spectre of protectionism. G20 leadership has thus far prevented this from happening, but the G20’s commitment to resisting protectionism is ultimately a defensive agenda. The UK can help lead a more positive one by spurring on new deals such as the Transatlantic Trade and Investment Partnership between the EU and the US. And trade diversification can be promoted through the pursuit of more bilateral initiatives such as those underway with India and China. Likewise the rich diversity of economies across the Commonwealth provides opportunities for all parties to gain from greater international trade. Fair and effective financial markets Open trade requires open finance. To secure the latter requires nothing less than the refounding of the global financial system. Since the crisis, globalised finance has been under siege. Cross-border capital flows have fallen sharply. There are constant pressures to Balkanise financial systems – myopic attempts to protect one country that weaken us all. As the leading global financial system, the UK will be central to completing the job of financial reforms that support an open and integrated system.
The ASEAN Finance Ministers have agreed in 2003 on the Roadmap on Monetary and Financial Integration of ASEAN in the areas of capital market development, capital account liberalisation, financial services liberalisation and ASEAN currency cooperation. In 2007, the ASEAN Central Banks established a task force, chaired by Malaysia, to chart the milestones and timeliness for ASEAN financial integration. To complement the AEC Blueprint, leaders in early 2009 have agreed to an Implementation Plan to promote the development of an integrated capital market within ASEAN. These initiatives along with other regional efforts will effectively transform ASEAN into a single integrated market, and thus strategically position ASEAN as an important economic zone with a role to play in contributing towards global stability and growth. With the broad diversity within Asia, the pace of development will not be equal for all economies. The general agreement is that growth within Asia will be led by China, India and Korea. In a large part, the shape of Asia’s future will be dictated by the dynamic engagement of these prominent growth drivers with other Asian economies and the rest of the world. The prospects for ASEAN to thrive would depend crucially on its ability to engage with these growth drivers and seize on the opportunities that they offer. However, ASEAN must also recognise that at the same time, the level of competition will further intensify within Asia.

This will both increase our economic resilience and decrease our reliance on the traditional markets for our export growth. Encouragingly this trend of export market diversification has already started before the onset of the crisis. A decade ago, the share of Malaysia’s exports to emerging and developing economies were below 50% of our total exports, but now, the figure has exceeded two-thirds. Going forward, it is important that this trend is reinforced. However, to achieve a more balanced growth, we need to not only leverage on our competitive advantage in the external sector, but also expand the strength of our domestic sector. Since 2003, domestic demand has been a main contributor to our economic growth, especially private consumption, in which growth has consistently outstripped that of the overall economy. Going forward however, a more sustainable balanced growth would require higher contribution from private investment. It is important to recognise that no country has ever managed to consume its way to prosperity. Both economic theory and the history of economic development point to the lesson that high-level of consumption does not guarantee higher rate of economic growth for a sustained period. 4  BIS Review 158/2009  Investment, on the other hand, is a prerequisite for a dynamic economy that is moving towards a higher level of income and development.
In fact, the research conducted by the Central Bank staff indicates that economic agents increasingly focus on past inflation while forming their inflation expectations. After evaluating the said developments, the Central Bank concluded that the increases in food and energy prices in recent years reflect a structural change stemming from the global economic environment. In other words, these shocks are likely to prevail for a longer time period, contrary to previous forecasts. There is no clear evidence at this point that this trend will reverse in the short term. Moreover, our revised projections suggest that even with the maintenance of a cautious policy stance for the foreseeable future, reaching the 4 percent target is going to take an extended period of time. Dear Guests, Under these circumstances, the Central Bank of Turkey had two options. The first one was to stick to the inflation targets, as many central banks do today, but to avoid implementing a monetary policy that is consistent with these targets. In other words, the Central Bank would accept a priori that inflation would surpass the target in the foreseeable future. The absence of any policy response would be justified by the presence of supply side shocks. The central banks that adopt this approach are bound to lose their credibility gradually, as long as the inflation continues to remain above the targets. The second option involves revising inflation targets to an attainable level and implementing a monetary policy that is in line with the new targets without compromise.

However, in the current environment where persistent and rapid increases in food and energy prices have been observed for a considerable period, the prevalence of this view has become questionable – especially in the light of current projections that foresee even higher prices in the near future. As a matter of fact, many countries under inflation targeting regime now project that inflation will converge to the target at end-2009 or in 2010, at the earliest. Going through a long period of high inflation is a serious risk for price stability. First, the general price level may shift upwards at a faster rate, as producers and workers in other sectors ask for higher prices and wages in response to the loss of their real purchasing power. The fall in real interest rates due to deterioration in inflation expectations is another risk, since lower real rates will lead to a faster pace of credit expansion. The common factor of these two risks is that persistent supply shocks may turn into demand shocks after a while. Thus, at some point, central banks have to decide to what extent they can tolerate the rise in inflation. As the famous philosopher Karl Popper put it while defining the demarcation problem, “if we do not demarcate a scientific hypothesis, we will be leaving out one of the key steps in verifying the correctness of that hypothesis”. Any theory should be formulated in a way to allow falsification; the circumstances under which the theory fails should be identified.
In addition, we have been active internationally – both bilaterally and multilaterally to ensure we have a coordinated, well-informed and mutually supportive approach. This includes our work as a member of the Financial Stability Board. So, while there are challenges, we are very much alive to them. We monitor the risks closely and work continuously with our partners to prepare, and stand ready to take any appropriate action. Opportunities for Hong Kong Having acknowledged the immediate challenges, I think it’s time now to turn towards the opportunities, above all in this region. For while the challenges from the West are deep, they should not blind us to the opportunities within Asia. I would say that the coming opportunities for the banking industry here are bright – even if at times they may appear to be obscured by clouds abroad. In fact, I believe that they put us on the threshold of a new era for the banking industry in Hong Kong. I would like to highlight two of the most promising opportunities. The first is the offshore RMB market, which has developed rapidly over the past two years. The second is the increasing demand for asset and wealth management services, both institutional and individual. Opportunity 1: offshore RMB market On the offshore RMB market, Hong Kong bankers have been the first ones to exploit the new business opportunities.

The Basel Committee, its member agencies, and the Financial Stability Institute of the Bank for International Settlements have long participated in regional training initiatives that are intended to help promote supervisors’ understanding of international banking standards such as the new capital framework. The Committee’s Accord Implementation Group likewise engages in outreach to supervisors in non-member countries, including through the Core Principles Liaison Group. I chaired a special session of such a discussion earlier this year because I am personally committed to improving that dialogue. 8  BIS Review 33/2004  We look forward to working with other institutions, including the World Bank and the International Monetary Fund, to assist other supervisors in their journeys as they come to their own crossroads for banking supervision. Conclusion In my remarks this morning, my intention was to offer more insight into why the Basel Committee believes that Basel II is such an important step in embracing a new, incentives-based approach to supervision. I also wanted to discuss how it will keep our supervisory framework up-to-date with the latest advances in risk measurement techniques and risk management practices. In my answers to the sensitive questions that I have heard from bankers and policymakers in other countries, I have sought to emphasise that the Basel Committee seeks the appropriate balance for Basel II between developing simple rules while maintaining their sensitivity to a bank’s actual underlying risks. We intend to align Basel II’s capital requirements more closely to banks’ actual economic capital needs.
Markets then responded favorably as EME authorities shifted toward clear, more consistent policies focused on inflation objectives and external sustainability, and away from policies with multiple and sometimes competing objectives. Let me now add a few thoughts about ongoing financial reform efforts. The complexity, severity and speed of the global financial crisis required a forceful and wide-ranging international regulatory response. This has included higher capital and liquidity standards, stronger recovery and resolution regimes for supervised institutions, and greater transparency and standardization in derivatives markets. These efforts will have a number of positive effects, although they may lead to some changes in bank business models and strategy in the U.S. and internationally. In the U.S., these efforts have made the banking system much stronger today than before the crisis. In aggregate, Tier 1 risk-based capital ratios among U.S. bank holding companies have increased to just under 13 percent, an increase of almost 45 percent relative to precrisis levels, and the quality of capital has improved. Bank holding company balance sheets are also significantly more liquid, with liquid assets increasing from 26 percent of total assets at end-2006 to 38 percent at end-2014. Core deposits now fund 44 percent of total assets, a 10 percentage point increase from pre-crisis levels. A stronger U.S. banking system better protects against future shocks, provides a more solid foundation for growth, and therefore also enhances prospects for growth and financial stability abroad. 3  “International Capital Flows: Reliable or Fickle?” World Economic Outlook, April 2011, Chapter 4.

Drawing on available estimates, the median of this indicator for the corporate sector as a whole is expected to fall from 3% pre-COVID-19 to virtually zero in 2020, in any of the macroeconomic scenarios considered by the Banco de España. Large firms are generally expected to suffer less pronounced falls in profitability. In any event, the operating deficit generated by many firms would lead to a deterioration of their financial position, resulting in lower own funds and higher debt to finance their liquidity needs. Thus, in the aforementioned early recovery scenario, the financial position of 55% of firms (with a weight of 51% in employment terms) would worsen in 2020, while in the more adverse scenario, this proportion would rise to 58%. However, despite this strong negative impact, around 40% of firms would continue to generate an operating surplus and to make new investments without a worsening of their financial position. In short, a significant number of firms are very likely to emerge from this crisis with higher debt levels and a diminished demand outlook, at least for some time. In this respect, it is also necessary to review the debt relief, restructuring and insolvency processes for firms, 5  with the aim of establishing pre-emptive, swift and simplified administrative procedures enabling them to pursue their business activity while they are still viable.