samchain/econo-pairs-v1 huggingface dataset:
The diverse professional training and experience of our staff are among the New York Fed’s strengths. Bank supervisors, risk managers, economists, traders and lawyers contribute insights from their respective professions that lead to better outcomes. In the spirit of learning from other disciplines, I am delighted to introduce today’s keynote speaker. Some of you may recall that, two years ago, Sir David Walker opened our first culture conference with the words, “I am grateful to the philosopher Onora O’Neill for reference to very relevant advice. "8Today we have gone to the source. Baroness O’Neill is professor emeritus of philosophy at the University of Cambridge, former president of the British Academy, and former chair of the United Kingdom’s Equality and Human Rights Commission. She was appointed a life peer and member of the House of Lords in 1999, and, in 2007, was elected an Honorary Fellow of the Royal Society. Today, Baroness O’Neill serves as a member of the Banking Standards Board. Her 2002 lectures on trustworthiness—reprinted in the book A Question of Trust —have been tremendously influential among New York Fed staff working on culture. Baroness O’Neill, the floor is yours. 1 Stephanie Chaly, James Hennessy, Jacqueline McCormack, Thomas Noone and Joseph Tracy assisted in  preparing these remarks. 2 William C. Dudley, Ending Too Big to Fail, Remarks at the Global Economic Policy Forum, November 7, 2013. 3 Thomas C. Baxter, Jr., The Rewards of an Ethical Culture, Remarks at the Bank of England, January 20, 2015.

4 Daniel Awrey and David Kershaw, “Toward a More Ethical Culture in Finance: Regulatory and Governance  Strategies,” in Nicholas Morris and David Vines, eds., Capital Failure: Rebuilding Trust in Financial Services, 284 (2014) (“While codes of conduct, ethics, and best practice can be drafted and held up as identifying desirable behaviors, the norms these codes purport to reflect may be overpowered by other countervailing influences.”). 5 Mark Egan, Gregor Matvos, and Amit Seru, “The Market for Financial Advisor Misconduct,” Working Paper 22050,  National Bureau of Economic Research, February 2016. 6 Gillian Tett, The Silo Effect, 45 (2016). 7 Ignazio Angeloni, Ethics in finance: a banking supervisory perspective, Remarks at the Conference on “The New  Financial Regulatory System: Challenges and Consequences for the Financial Sector,” September 26, 2014. 8 David Walker, Trust and Trustworthiness in Banks and Bankers, Remarks at the Federal Reserve Bank of New  York, October 20, 2014. 3/3  BIS central bankers' speeches
There are challenges that still exist in coordinating across multiple agencies – domestically and internationally and, at times, with competing agendas (e.g., prudential vs. conduct). As well, there remain some challenges to effectively sharing information, and while some legal impediments have been resolved, the seamless exchange of information is not yet the norm among key supervisors. I do believe that the trust level is building among supervisors as a result of the hard work over the past couple of years, but this will be an ongoing effort as players change and circumstances evolve. There have been several opportunities over the past year to test some of the close coordination among supervisors and regulators, and I think they have provided valuable experience – and lessons learned – for those involved. What I think has been clearest in those lessons is the ongoing need to coordinate – to ensure that problems are well understood from each vantage point or jurisdiction, that mitigants are discussed and implemented as necessary, and that all stakeholders are well informed – all of this to ensure that problems don’t become systemic. A final point on enhancing coordination and communication is ensuring that supervisors continue to develop an understanding of the impact of the new rules and regulations across global organizations. As I noted earlier, there is recognition that regulatory changes are affecting strategies, business models, and business activities in a meaningful way – and that this is occurring across organizations (not just locally).

At that time, the euro will probably also be easily accepted for payments in Swiss border regions and tourist areas. As final advantage, the single currency greatly enhances market transparency and stimulates competition. On the one hand, Swiss importers can now directly compare euro denominated offers from different countries. On the other hand, exporters can less easily differentiate prices according to the market destination of their products. In the long run, transparency will promote efficiency for EU-members and non-members. The almost daily news about mergers and acquisitions in Europe is an expression of the ongoing fight for a favorable position on the unified European market. 2. Extraordinary stability of the Swiss franc/euro exchange rate in the past ...  After these remarks on the general consequences of the euro for Switzerland, let us now turn to the more specific, but nonetheless central, question of the exchange rate between the Swiss franc and the 1  BIS Review 17/2000  euro. As already mentioned, the exchange rate between the Swiss franc and the euro is of crucial importance to the Swiss economy. So far, the relation between the two currencies has been remarkably stable. Since the introduction of the single currency, the Swiss franc/euro exchange rate has fluctuated in an extremely narrow band of only 2%. Thus, exchange rate volatility has until now been even lower than the 8% volatility observable between the Swiss franc and the Deutsche mark during the three years preceding the monetary unification.
At the same time, the focus on manufacturing has made China a significant player in the world economy, able to attract international expertise for further development of the corporate sector. Second, China can take advantage of the lessons learned by others during the Asian crisis, when many countries experienced that small reserves in a period of economic turbulence can be hazardous. Third, China requires substantial savings to prepare for the future needs of an ageing population. The export surplus combined with high domestic investment may be a sound savings strategy. Nonetheless, changes in China’s policy are no doubt on their way. An appreciation in real terms seems inevitable, potentially through higher domestic cost and price pressures. There are already clear indications of this. Western economies, however, should not primarily be looking to remedy their own trade deficits via China’s exchange rate policy. The imbalances in the US and Europe are the result of countries living beyond their means. Deficit countries must come to grips with their own problems. Capital flows and real interest rates As a mirror image of the trade imbalances, capital has flowed from emerging economies to rich countries. Normally, capital flows to the highest returns. This would imply that capital is transferred from countries with a large capital stock and inadequate savings to countries where the stock of capital is small and there are opportunities for profitable investment. In that case, capital should rather have flowed to emerging economies, and not the reverse, as we have witnessed in recent years.

This Construction Sector Group has found that approximately one-third of unemployed construction workers lack occupational experience and around 6 per cent also lack formal training. In that the average age of construction workers is rising and young people do not find construction work attractive, the bottleneck  5  BIS Review 18/1999  problems may become even greater in the future. In order to prevent this from leading to sizeable problems, proposals have been put forward for increased mobility, improved competence and marketing of construction courses, for example. Construction costs are measured by the factor price index (FPI); the largest item is wage costs. The price of completed dwellings, on the other hand, is measured by the building price index (BPI), which also includes the construction companies’ productivity and profit margins. These indexes do show relatively large price increases but there are no actual signs of any direct risks of an inflationary development in Sweden in the coming years, provided that the bottleneck problems do not increase. The rising costs associated with earlier upswings in activity have been connected with the contemporary subsidy systems as well as the high degree of concentration in the construction market. The revised system for financing residential construction has appreciably reduced one of these problems: construction companies as well as consumers are exposed more directly to production costs. But the problem of concentration in the construction market still remains and may be a future cause for concern.
Fiscal policy had previously often been too expansionary and contributed to high inflation. Now it was subjected to requirements for long-term stability and durability in public finances. With a floating krona the main task of monetary policy was to directly act to ensure that inflation remained at a low and stable rate. In January 1993 the Riksbank specified this task as ensuring that inflation remained at two per cent a year. The target would formally apply with effect from 1995. This created a new norm for monetary policy and Sweden then became one of the first countries in the world to conduct monetary policy with a floating exchange rate and an explicit inflation target. It may be worth mentioning that the Riksbank’s tasks are also stipulated by law. The objective of maintaining price stability and the task of promoting a safe and efficient payment system were introduced into the Sveriges Riksbank Act in 1999. In connection with this the Riksbank was given greater independence. Monetary policy is now formally the Riksbank’s task and the six members of the Executive Board are expressly forbidden to seek or receive instructions when carrying out monetary policy tasks. This is the same model as applied within the ESCB. The period with an inflation target How have the past ten years or so of inflation targeting functioned? Looking back, it is difficult to come to any other conclusion than that the new stabilisation policy regime has lived up to expectations.

However, the development of the CPI cannot always indicate what monetary policy is needed at a particular time – no single inflation measure can do this. The Riksbank therefore uses different measures of underlying inflation to describe the trend rate of inflation and to justify the monetary policy decisions. Our most commonly used measure, with the rather difficult to pronounce name of UND1X, consists of the CPI adjusted for certain items that are affected by fiscal policy and monetary policy in a direct way. There are educational gains with using measures of underlying inflation. However, it can also create uncertainty as to how the inflation target is defined, even if we try to be clear about why a particular measure has been highlighted at a particular time. Such experiences have given us reason to think about how the need for various adjusted inflation measures can be reduced. One possibility could be to make forecasts covering longer periods. For the Riksbank the need to emphasise alternative measures of inflation growth has declined in that we have for some time now published forecasts of developments three years ahead instead of two years ahead. With a longer forecast horizon it is possible to illustrate more clearly when various shocks have effects that are temporary and how they dissipate over time without having any lasting impact on inflation. This makes it easier to explain whether or not the interest rate needs to be changed.
That said, there are some nascent signs that the economy may be doing better. For example, based on the first estimate, which is subject to revision, real GDP increased at a 2.8 percent annual rate in the third quarter of 2013, above the trend of the past four years. And the most recent payroll employment report showed a pickup in the monthly pace of job gains. The 3-month moving average rose back above a 200,000 pace after slowing to about 150,000 as of July of this year. I hope that this marks a turning point for the economy. But before we rush to this conclusion, a few more cautionary comments are appropriate. With respect to GDP growth, it turns out that inventory investment contributed ¾ of a percentage point to that overall growth rate. Thus, because this impetus from inventories will  BIS central bankers’ speeches  1  likely reverse this quarter, the real GDP growth rate is likely to slow to around a 2 percent annual rate or a bit less in the fourth quarter. With respect to payroll employment, we have seen such bursts in payroll growth before over the past few years and have been disappointed when the pickups proved temporary and did not lead to a rise in the overall growth rate. But, I have to admit that I am getting more hopeful.

Lack of effective competition in the payment card industry had led to higher costs for payment card transactions, which would in turn raise costs for businesses and consumers. Over a period of 14 months from May 2013 to June 2014, interchange fee, that is the wholesale fee paid between banks in a payment card transaction, were hiked several times. As interchange fee is priced into the MDR, the hikes in interchange fee contributed towards an increase in the MDR for merchants. A lack of price transparency and the overall competition further weakened market pressure to lower interchange fee and MDR. BIS central bankers’ speeches  1  The highly concentrated market also discouraged merchants from switching to another payment card network given concerns over losing significant competitive advantage if they did. Clearly, left unchecked, such indiscriminate interchange fee hikes risked bringing about a broad-based increase in MDR which would in turn be passed on to consumers through higher retail prices of goods and services. To curb indiscriminate increases in payment card acceptance cost and foster a competitive payment card market, Bank Negara Malaysia implemented the Payment Card Reform Framework in July 2015. Under the Framework, the interchange fees are subject to objectively-set ceilings, while a market incentive structure was instituted to strengthen the incentives for investments in payment card infrastructure. In addition, measures were also introduced to enhance transparency and competition by prohibiting restrictive trade practices. The results of such measures are very encouraging.
National authorities are concerned with the risks of asset inflation and volatility of capital flows. But properly structured, these provide unique opportunities to channel the much-needed capital for growth and development. In this regard, Islamic finance which has its central emphasis on supporting real economic activities in trade, investment and the growth of productive capacities is especially relevant. 12. However, effective intermediation of capital requires focused attention on the management of risks. As I mentioned in my speech at the previous WIBC, many risks – including credit, market, liquidity, operational and reputational risks are common to both conventional and Islamic finance. Overly-optimistic projections of growth, or overconcentration in particular sectors, or mismatches in assets and liabilities can give rise to risks that can damage financial institutions. The crisis serves as a valuable pause from the frenzy of financial activities. This allows us to re-evaluate risk management practices in individual financial institutions, as well as the systemic linkages across institutions, instruments and markets. 13. Central banks and regulators need to cooperate closely so that risk assessments can be shared and common action taken where necessary. The Central Bank of Bahrain (CBB) and MAS have enjoyed very good relations, and have worked to promote Islamic Finance. The CBB is a highly-regarded central bank and integrated financial regulator. I am pleased that the MAS and CBB will be signing a Memorandum of Understanding later today to build on our existing strong relationship to enhance supervisory cooperation and information-sharing. 14.

It fell by as much as 10 percentage points according to some estimates as the shocks from the crisis – deleveraging, the slowdown in world trade and the increase in uncertainty – pushed the natural rate very deep into negative territory. 6  Even using QE, it was difficult for monetary policy to follow the natural rate down to the level necessary to offset the shock and to close the output gap over the policy horizon. In other words, though it appeared exceptionally loose by historical standards, bank rate at ½% and a very large, £ programme of asset purchases, in retrospect, constituted a tight policy setting relative to what the economy needed to offset the shock. This is perhaps one reason why the UK recovery from the post crisis recession was slow by historic standards. It is generally acknowledged that the exceptional monetary policies implemented in the years immediately following the crisis were necessary. However, we are now eight years on and monetary policy still appears to many exceptionally loose by reference to historical rates of interest. Can this still be justified by reference to the natural rate? My own view is that it can. The natural rate, according to most estimates, has risen since 2012 from its deep post-crisis trough. It is now closer to the zero mark but it’s still likely to be negative.
The pharmaceutical industry has gained in importance, whereas the share of exports of machinery has declined. In passing, let me just mention that the popular cliché which associates Switzerland with watches is actually true. Their share in total goods exports is sizeable (11%). Note, however, that this has nothing to do with cuckoo clocks, which were invented and are produced in Germany. A closer look at the development across industries reveals that this compositional shift is important in understanding Swiss performance during the crisis. In fact, individual export categories were affected very differently by the great international trade collapse in 2009. While shipments of machinery and metals suffered severely, dropping by roughly 30%, exports of chemicals and pharmaceuticals barely declined at all. As this sector accounted for more than one-third of total exports in 2008, it strongly dampened the negative impact of other sectors. Exports of watches also provided important support. The second structural change has occurred within industries. For instance, the machine industry today is not the machine industry of the 1990s. There has been a constant effort to innovate both products and production processes. Swiss businesses have specialised in high-value-added products. Switzerland has among the highest densities of high-tech industry in the world. The volume of research and development spending is driven by large multinational firms in globally integrated economic sectors, such as pharmaceuticals and chemicals. But small and medium-sized manufacturing firms in a broad range of market segments also play a key role in Swiss exports, and are typically also strong innovators.

These two key features of the British and Australian systems illustrate how the arrangements in Hong Kong do not go as far as, or are less formalised than, those in other jurisdictions. This may have something to do with different philosophical approaches: in Hong Kong the tradition has been a freemarket one, which entails a very low level of government involvement in business relationships. But as the Hong Kong market becomes more sophisticated and more competitive, and as consumer issues are coming more to the fore, it may be useful to consider whether Hong Kong should follow the path of other jurisdictions. At this early stage of discussion, there seem to be three broad options, which are not necessarily mutually exclusive. The first is some form of self-regulation by the banking industry. The second is to provide a specific mandate to the regulator, that is the HKMA. The third is to place the responsibility in the hands of an Ombudsman. There are a number of issues – some philosophical, some practical – that will need to be taken into account in deciding in the fullness of time where the responsibility would lie. As far as the HKMA is concerned, the arguments for and against are, I suggest, finely balanced. One argument holds that a more formal role for the HKMA in this area might create a conflict of interest between our prudential regulation and consumer protection roles.
Strong growth in the world and in China and India are driving a very good terms of trade scenario, together with good access to our products in world markets. Thanks to its openness and to its macroeconomic policy framework, Chile has reaped the benefits of this good scenario both in the sense of reaching average growth close to the trend and in accumulating resources that may permit to prevent a real appreciation while ensuring funding for public spending, should the terms of trade deteriorate. This policy framework permits to prevent episodes of unsustainable expansion and crises that came with terms of trade cycles in the past. BIS Review 87/2007  5

As the balance sheet increases in size, the potential costs increase in terms of market functioning, risks to financial stability, and the path of future remittances to the U.S. Treasury. Second, there is a limit on how far the expectations channel can be exploited. As I discussed earlier, since the current FOMC cannot bind future FOMCs and the economic outlook is highly uncertain, it isn’t reasonable to expect that policies that affect expectations many years in the future will have a powerful impact today. I believe that the effectiveness of the expectations channel decays as the length of the horizon extends. Third, monetary policy is only one leg of the stool necessary to generate a vibrant and sustained economic expansion. In particular, as noted earlier, the health of the financial system is critical. For without it, the monetary transmission channels will be impaired and monetary policy will be less effective in influencing the cost and availability of credit. Similarly, it is critical that fiscal policy be set appropriately. This means the short-term impulse needs to be properly calibrated to the current set of economic circumstances (not  9  With respect to borrowing costs, this is particularly true in real terms. BIS central bankers’ speeches  7  too much restraint) and the long-run budget trajectory needs to credible and consistent with fiscal sustainability. Finally, removing structural impediments that hinder growth and economic rebalancing are also important.