samchain/econo-pairs-v1 huggingface dataset:
Ksenia Yudaeva: National debt – vice or virtue? Statement by Ms Ksenia Yudaeva, Deputy Governor of the Bank of Russia, at the Gaidar Forum 2016 “Russian and the world – looking to the future”, panel discussion “National debt – vice or virtue?”, Moscow, 13 January 2016. *  *  *  Before starting the discussion I would like to say a few words about the current market situation. Following the 2008–2009 crisis, bursts of volatility can occasionally be observed in global markets. The reasons are different: debt crisis in the peripheral eurozone countries, changes in the US Fed’s policy, changes in the structure and strategies of the oil market players or, as in the past six months, the situation in the Chinese market. Anyway the bursts of volatility relate to the adjustment of global imbalances, which have been piling up for years, and they are inevitable to a certain extent. This is a part on the new reality we are living in. Given the situation, the Bank of Russia’s main task is to stabilise the Russian economy amid external shocks, create conditions for its quick adaptation to the new environment while retaining high price stability, and macroeconomic and financial stability in general, and henceforth maintain basic conditions for economic growth. If we turn to the situation in the Russian markets, we can see that recently it has been rather stable despite global volatility. There are no problems with liquidity and other risks to financial stability.

This is another manifestation of interdependence between fiscal and monetary policies: the more successful the central bank is in terms of securing sustainable price stability, the larger is the room for manoeuvre used by the Government to build up budget deficit and government debt to pursue a countercyclical policy. Actually, there is no choice whether the government debt is good or bad. Any medicine can be fatal, or at least toxic, if overdosed. The same is true of the government debt: it can easily turn out from a basis for the financial system development to its grave digger. This is one of the reasons which cannot help being taken into account in shaping fiscal policy. While assessing the size of potential development of the Russian debt market, one cannot help taking into account several material risk factors. The first one is various off-balancesheet budget liabilities, explicit and implicit ones. The case of Vnesheconombank shows that they may be rather significant. Therefore, balancing federal budget alone without accounting for debt accumulation by the regions is insufficient. Such factor as population aging and the need to finance the growing costs of pension provision in the next five to ten years cannot be ruled out either. The second factor is high uncertainty in the global commodity markets, first of all, the oil market. This is another argument in favour of using conservative scenarios. Finally, there is uncertainty with regard to the duration of the period of low oil prices.
A more detailed description will be provided by Professor Lars Jonung. Economists of the time could not, based on historical evidence, predict that national and international monetary systems would be facing substantial disturbances that would push up the price level considerably and lead to extensive instability. With the First World War, the gold standard was suspended and the money supply and price level rose sharply. The deflationary policy of the 1920s brought the price level down, but probably also contributed to instability. The price level rose again during the Second World War, when the occupying powers used the printing press to finance a substantial portion of their expenditure. The economic policy of the 1970s and 1980s contributed to high inflation. So, how well would economists in 1905 have predicted the Norwegian level of real income in 2005? BIS Review 43/2005  1  They would have been off the mark here too. They were not in a position to predict that the growth rate in the Norwegian and global economies would rise as a result of considerable technological progress, restructuring and higher productivity. On the other hand, they could to some extent have predicted our current industry structure based on their economic history. From 1865 to 1900, primary industries’ share of total GDP fell from about 34 per cent to 22 per cent. In the same period, manufacturing, other goods production and service industries accounted for an increasing share of total GDP.

In 1900, about 24 per cent of GDP was generated by manufacturing and other goods production. If the economists of the time had projected developments in these three industries, they would have estimated that primary industries’ share of total GDP would fall to below 5 per cent. Manufacturing and other goods production would increase its share to 30 per cent and service industries to 66 per cent. Value-added in primary industries fell somewhat more than economists in 1905 would have projected and service industries increased somewhat less. They would have been less accurate in their projections for developments in manufacturing. Although manufacturing’s share of total GDP increased up to the beginning of the 1950s, growth in private and public services gradually bypassed manufacturing, and the petroleum sector held an increasingly important position from the 1970s. The expansion of the petroleum sector and the use of petroleum revenues contributed to maintaining high growth in Norway, while other countries experienced a slowdown. Are there lessons to be learned from the pitfalls of projecting or trend-extending economic variables? Lessons to learn First, one lesson to learn is that it very difficult to predict developments in the real economy. If we were to extend the historical growth trend today to predict the future level of income, we would probably also be considerably wide of the mark. Today, we know nothing about the technological innovations that might appear in the future.
Peak to trough, output fell just over 6% in the United Kingdom, almost 4% in the United States, nearly 7% in Germany and more than 8% in Japan. And in the eight months following the collapse of Lehman Brothers, world trade collapsed by almost a fifth, a figure completely unmatched in peace time. Governments and central banks around the world responded by providing substantial support to their banking systems, relaxing fiscal policy, slashing official interest rates and, in some cases, introducing unorthodox monetary measures. This succeeded in avoiding the worst of the immediate downside risks to activity and employment. China and some other emerging economies have subsequently rebounded strongly, and during the second half of last year, we saw growth resume, albeit at a moderate pace, in most of the advanced economies. It appears to have taken a little longer for expansion to return here but, according to the current vintage of official data, output rose 0.3% in the final quarter of 2009. Production and trade are likely to have been adversely affected by the inclement weather in January, but business surveys suggest that a similar rate of expansion will occur in the first quarter of this year. While a return to growth is certainly good news, it is clear that we still have a very long way to go before recovery from the Great Recession of 2008–9 is complete. A large margin of underutilised resources in the economy remains and it will take time before these are returned to active use.

In April 2020, as the global economy was still reckoning with the many consequences of  Page 5  prolonged lockdowns, West Texas Intermediate (WTI) oil future contracts close to their expiry date went from positive to negative – people were willing to pay for you to take oil off their hands. Last year, in February 2021, the Great Texas Freeze hit as a result of several severe winter storms; we saw the coldest weather there for generations. This overwhelmed much of the state’s power infrastructure, leading to extraordinary spikes in natural gas and electricity prices – multiplied several hundred times in some markets. Earlier in March this year, the 3-month Nickel contract price rose $ per tonne in two days, and then rose a further $ per tonne in overnight trading, prompting the London Metal Exchange to suspend trading in nickel futures and cancel the overnight trades. These are absolutely extraordinary price moves – the previous historical record two-day increase was $ per tonne (September 2007). There are numerous lessons to be learned from this incident and we have announced an independent review into LME Clear’s governance and risk management framework. [9] CCP’s models and regulation are designed based on history. Initial margin covers price moves with at least 99 percent confidence. CCPs design stress scenarios to prepare for extreme but plausible events. We need more work on what to do about the implausible. [10]  (3) Ignore structural factors at your peril A basic lesson in science and ecology is that population structures matter.
The issue of authority for central banks begins, in all cases, with the law, and includes the obvious questions of what kind of law is suitable for a particular central bank; how you change a law that is no longer suitable; and what is the optimal timing and strategy for changing the law. But, as your discussions have stressed, there is more to this than the mere word of the law. An interesting aspect of the sharing of experience here has been the extent to which central banks have worked with - and sometimes around - laws that have become inadequate to the needs of modern central banking. As I mentioned in my opening remarks, in the case of the HKMA it has been a question of working without the law, since Hong Kong has no formal central bank law, and we rely on just a few lines of a single statute for our authority. A further point that has been made strongly is the need to base the legitimacy, the credibility of a central bank on something more than just statutes and regulations. This brings into play the question of accountability, through both formal and informal channels. I know that a great deal of your discussion has focused on the role, composition and responsibilities of the board. More broadly, there has been equal emphasis on how we account to the wider public.

Peter Pang: A decade of Hong Kong Dollar settlement in the CLS system Opening remarks by Mr Peter Pang, Deputy Chief Executive of the Hong Kong Monetary Authority, at the 10th anniversary celebration of Hong Kong Dollar settlement in CLS, Hong Kong, 21 October 2014. *  *  *  David 1, distinguished guests, ladies and gentlemen, I am honoured to be here today to celebrate the 10th anniversary of the Hong Kong dollar settlement in the CLS system. Opening 2. If we were a married couple, this event would mark our Tin Anniversary, with tin symbolizing durability and pliability. It is good to note that our bonding remains robust, despite the fact that CLS has 16 other currency partners, and its desire to have more in the future. 3. According to Jane Austen, “happiness in marriage is entirely a matter of chance”. Being a monetary authority, the HKMA would not leave such an important financial infrastructure for addressing the FX settlement risk to chance. 4. The one thing that keeps our bonding with CLS strong is our common vision – to provide the solution to help market players eliminate the FX settlement risks through a highly effective and efficient settlement platform. 5. Our decision to join the CLS in 2004 was based on the simple fact that CLS provides the most powerful global solution to eliminate the FX settlement risks among market players. And CLS has delivered such a solution without a hitch in the past decade. Good times 6.
Economists typically concentrate on three sources of economic benefits related to monetary union. These are: -  lower transaction costs,  -  lower interest rates,  -  trade creation. Transaction costs is an issue of particular relevance for people who sit today in the audience. Everyone exchanges currencies, knows what spreads are and could even possibly calculate how much his company would save on transaction costs if there were no exchange rates. This is also relatively unsophisticated for the whole economy, and has been estimated to be approximately 0.2% of GDP in Poland (NBP 2004). Not much, but worth saving. Lower interest rates induce investment, thus strengthening the productive capacity of the economy and making higher output and consumption possible. We expect that in the case of Poland the interest rate adjustment after eurozone accession will reduce long-term rates by more than one percentage point. Any estimation of the exact impact on investment, output and consumption is subject to several assumptions. Nevertheless the NBP’s analyses show that an interest rate reduction will be the main source of benefits from joining the euro (Borowski 2003). The benefit we know the least about is related to trade creation. In a groundbreaking study Rose (2000) estimated that joining a currency union may boost cross-country trade by over 200%. Most economists agreed with the direction and mechanism behind this – the single currency eliminates the uncertainty related to exchange rate movements and thus diminishes the risk related to foreign trade.

If economists speak about the advantages and disadvantages of joining a common currency area, they ultimately end up comparing the costs and benefits of accession. This is also the way I would like to proceed. However, bearing in mind that what is known, has already been described in several voluminous reports (NBP 2004 for Poland, Csajbok, Csemerly 2002 for Hungary, HM Treasury 2003 for the UK), I will try to focus on issues which are less familiar to the general public or which are potential risk factors. The nature of these issues is that they are mainly concentrated on the cost side of the analysis. Thus, it might seem from my lecture, that I mainly care about the costs or that costs outweigh benefits. Let me, in the very beginning, stress that this is by no means the case. As stated by the President of the National Bank of Poland, Mr Sławomir Skrzypek, an in-depth assessment of the costs and benefits of the euro adoption in Poland needs to be periodically repeated in order to make sure that we take into account all important factors of the fast changing global economy. The National Bank of Poland is willing to play a key role in stimulating the public debate about the costs and benefits of the euro adoption. Today’s panel is a good opportunity to contribute to this debate, and I would like to thank the American Chamber of Commerce for offering this opportunity. Let me begin with the benefit side.
Instead, policymakers would need to meet periodically to make difficult judgments faced with enormous uncertainty. I should touch on, although I do not have time to elaborate tonight, on three consequences of such an approach. First, this would be a data intensive endeavour. The macroprudential authority would probably need information on sectors to which the banking system was exposed going beyond anything that has been collected to date, particularly in the non-bank financial sector. Whether that renders this kind of approach overly ambitious is part of what we should all debate. Second, in a regime involving judgments, the macroprudential authorities would need to explain publicly the basis of their decisions and how they related to their mandate and specified objectives. Moreover, as in the monetary policy sphere, transparency might enhance the effectiveness of macroprudential instruments. That is because over time banks (and other lenders) would develop an appreciation of the circumstances in which the macroprudential toolkit might be deployed, requiring them to hold more capital or liquidity against a build-up of exposures. Third, the macroprudential authorities would need a deep and broad understanding of the financial system. While the big picture story of the current crisis is clear ex post, recognising it in advance would have required, amongst other things, looking under the bonnet of the structured finance industry and elsewhere to see the obscure way in which leverage and liquidity mismatches were accumulating. That would have helped an understanding of the expansion of bank balance sheets.

The second is that the financial system is a system. One that contains complex and shifting inter-connections. And one that can generate pronounced credit cycles, which even if they initially affect only asset values, eventually can materially affect the real economy. This is why the macroprudential debate is so important. It has been a long time coming. 11 This evening I have outlined some of the Bank’s current thinking on where it might be feasible to develop a toolkit of useful macroprudential instruments. It is not a set of firm recommendations. An open discussion is needed before anyone can reach that point. But I hope it is a useful contribution. We plan to expand on it in a discussion paper over the next few weeks. 11  The beginnings of the macroprudential debate can be traced back at least to Crockett, A (2000): “Marrying the micro- and macroprudential dimensions of financial stability”, BIS Speeches, 21 September 2000. BIS Review 134/2009  11
Furthermore, we will monitor closely the effects of the adjustment in minimum wages on overall wages and on inflation (Chart 14). Chart 13. Chart 14. (Seasonally Adjusted, Annualized 3 Month Average, Annual Percentage Change)  (2003 Prices, TL)  Core Inflation Indicators SCA-H and SCA-I  Source: TURKSTAT, CBRT  Real Gross Minimum Wage  *Real gross minimum wage is obtained by dividing the average gross minimum wage at current prices to the consumer price index in a given year. Consumer price index is taken as 2003=1. Consumer prices in 2016 are based on January 2016 Inflation Report projections. Source: Ministry of Labor and Social Security, TurkStat, CBRT. In sum, annual inflation increased in the fourth quarter due to an ongoing rise in food prices as well as the lagged effects of the Turkish lira depreciation throughout 2015. We believe that the upcoming inflation outlook will depend on both the volatility in energy and unprocessed food prices and the effects of the global market uncertainty on inflation expectations. In addition, the large adjustment made to net minimum wages for 2016 will have an impact on inflation. Therefore, we expect inflation to remain elevated for some time. At this juncture, in addition to maintaining our tight monetary policy stance, fighting against the structural elements of inflation also remains important. Notwithstanding the significant external shocks in recent years, we were able to limit the worsening in inflation and inflation expectations thanks to our current policy framework, but price stability is yet to be achieved.

We do that through the minutes of our monthly meetings and the quarterly Inflation Report; and, in terms of our individual analyses, through speeches, etc. But, like anybody else, we cannot predict with certainty what will happen in the economy. There are always material risks around the central outlook. We have to weigh those risks in our policy decisions in much the same way as you do in your business and financing decisions. In the midst of all this unavoidable uncertainty, however, a few things are not in doubt. The MPC’s official interest rate is certain. So there should be no uncertainty about the general level of overnight rates in the money markets. In fact, though, overnight rates in the UK have historically been highly volatile. Various steps taken over the past decade or so moderated that volatility – with some success; it has for some while been much lower than in the mid-1990s (Chart 1). But it has remained greater – from day to day, and during the day – than overnight rates in dollars, euros etc (Charts 2 and 3). That has created uncertainty for users of the sterling money markets – banks, asset managers and, of course, corporate treasurers. Avoidable uncertainty. BIS Review 47/2006  1  It is the Bank of England’s responsibility to remove that uncertainty as much as we possibly can. And yesterday, after more than three years’ preparation and extensive collaboration with market participants, we introduced a completely modernised system to do just that.
The funding cost relief is direct for those banks that switch from more expensive options to 9 / 19  BIS central bankers' speeches  TLTRO financing. However, there is also an indirect channel that benefits the entire banking system: while looking ahead banks will have to step up their issuance in order to satisfy regulatory requirements, the TLTRO programme will help avoid cliff effects by allowing banks drawing TLTRO funds to cancel or postpone plans to issue bonds in the market. This reduction in the supply of securities relative to what we would see in the absence of TLTRO III creates a scarcity channel that puts further downward pressure on bank bond yields, resulting in funding cost relief across the board. The upshot of cheaper bank funding is higher credit volumes and lower lending rates to the wider economy via the bank lending channel.9  10 / 19  BIS central bankers' speeches  In fact, our experience with previous TLTROs (TLTRO I and II) was that these operations had a significant effect on funding costs, particularly in more vulnerable euro area countries. Moreover, the lower funding costs were passed through to customers. Particularly in vulnerable countries, banks that participated in TLTROs cut their lending rates by more than their non-participating peers (see Chart 6). The policy package In assessing the impact of our policy package, we must also take into account that the instruments were designed to be complementary and mutually reinforcing.

Via this re-evaluation, negative rates loosen the perceived lower bound on the future distribution of short-term interest rates.4 Through this mechanism, negative interest rates have a marked impact on transmission, particularly in the euro area, as they push down the short and medium segment of the risk-free curve, which for the most part is the segment of the curve that determines the pricing of loans to non-financial corporations. It follows that control of this segment of the curve directly influences the level of lending rates. To illustrate the effectiveness of negative policy rates, ECB staff undertook a counterfactual exercise. They constructed the forward curve that would prevail in a scenario without either the negative interest rate policy or the forward guidance on the future path of the policy rates. As shown in Chart 2, the forward curve derived from the overnight index swap curve would be pinned at a higher level and would be distinctly steeper (the dashed blue line on the right) than the forward curve that we observe today (the red curve). 3 / 19  BIS central bankers' speeches  While this mainly serves as an illustration, as it is based on a number of assumptions and input parameters, it is indicative of the sort of tighter interest rate constellations that the euro area economy would face in the absence of this important policy tool. Our negative policy rate thus contributes substantially to providing monetary accommodation.