samchain/econo-pairs-v1 huggingface dataset:
These technical committees deal with issues ranging from accounting, auditing and legal matters and banking supervision, to market operations, payment and settlement systems, statistics and information technology. The early presence of accession countries’ central banks on these committees serves to underline the fact that adopting the single currency involves more than the physical introduction of euro notes and coins would suggest, although this, too, will be one of the Central Bank’s responsibilities should the day come when euro notes and Maltese-designed euro coins become legal tender. Indeed, the adoption of the euro touches upon the most fundamental aspects of a central bank’s core functions, its operational framework and its institutional set-up. It could be described as the start of a new and challenging phase that will give another dimension, not only to the Central Bank itself, but to policy-making in Malta more generally. And, not least, as may be seen from the papers presented at this seminar, the single currency also holds out the prospect of significant efficiency gains and, therefore, of financial savings.

Private debt has increased, although it has also increased in Europe. The counterpart to these developments is a high level of saving in Asia – primarily China. Asia’s willingness to purchase US Treasury bonds has allowed the imbalances to build up further. The Norwegian economy is also part of this picture. High oil prices have resulted in substantial surpluses in oil-exporting countries’ current accounts, which have been invested in international capital markets. A balance of payments surplus provides the opportunity to save and apportion revenues over time. Trade deficits and surpluses do not necessarily reflect an imbalance, but can be a prudent adjustment. Chart: Exports from emerging economies in Asia Emerging economies in Asia now account for 16 per cent of total global exports, compared with 9 per cent in 2000. With substantial labour reserves and a cost level that is considerably lower than other countries, it has been easy for emerging economies to find markets for manufactured goods. A Chinese manufacturing worker’s hourly wage is about 1/20 of a US worker’s wage3. Even though there are considerable gains related to international trade and free capital movement, there are also dangers to be avoided. Over the past thirty years, a number of countries have been hit by financial crises. The Asian crisis at the end of the 1990s showed that the combination of large trade deficits, small foreign exchange reserves and a fixed exchange rate regime proved to be demanding.
In the euro area economies, the high unemployment levels and the need to reduce significant debt ratios curbed the expansion of demand, while the fragility of banking systems hampered the transmission of monetary policy measures to the real economy. These factors obliged the ECB to take a different tack and turn to so-called nonconventional measures. Firstly, the interest rates on ordinary monetary policy operations were successively cut, placing the deposit facility rate at a negative level of -0.4%, which currently remains in place. Secondly, the ECB introduced a new long-term financing facility for the banking system, which was linked to the granting of loans to households and firms. Thirdly, in 2015, the ECB took the historic step of launching a quantitative easing programme by means of the large-scale purchase of public and private assets. Currently, purchases are being made at a monthly pace of € billion, and this is expected to continue at least until next December, whereby at the end of the current year the scale of asset purchases will be drawing close to 22% of euro area GDP. Lastly, communication has become a most important instrument for influencing agents’ expectations and heightening the effectiveness of measures. Specifically, the ECB has incorporated forward guidance on interest rates and the purchase programme into its communication.

After several years’ moderate growth, the euro area has arrived at a favourable cyclical juncture. On the latest available figures, annual output growth is currently running at almost 2%. This rate exceeds the European Commission’s estimates of potential growth, which stand at around 1%. The soundness of the economic recovery is beginning to be reflected in the more dynamic behaviour of private investment. That breaks with a long period over which companies’ plans to increase capital were checked by uncertainty over future growth and the need to reduce their high levels of debt. Moreover, the recovery is extensive to the entire euro area, since all countries, including Greece, have attained positive growth rates. The improvement in economic activity has also enabled unemployment levels to be reduced to rates close to 9%, down from the levels of 13% observed at the worst points of the crisis. Significantly, this improvement in activity has come about against a difficult political background, marked by the start of the Brexit process and the rise in certain trends that are against free trade and the free circulation of people, freedoms that are the bedrock of the European project, and this without forgetting the permanent threat of terrorism. Returning to the positive economic developments, we should not forget two central matters. Firstly, these developments are largely the consequence of the extraordinary stimulus received from monetary policy.
First, would standstills risk cutting-off capital flows to the emerging markets - if you like, killing the goose that lays the golden egg? History offers some clues here. For example, there appears to be no evidence from 1930s experience of defaulting countries having fared worse than non-defaulting countries in terms of subsequent output growth. And looking across a broader sweep of history, some empirical evidence has failed to find any discernibly negative long term effect of a country’s prior debt-servicing record on the terms or volume of its borrowing. That is not to say that default is costless, certainly in the short to medium term. The loss of access to capital markets and the time and effort involved with restoring credibility with creditors is, quite correctly, a strong deterrent for any country contemplating default. Historical evidence may in any case be uninformative about investor behaviour in the future under a more structured framework for international crisis resolution. If this framework helped resolve the collective action problem among creditors, it ought to benefit creditors as well as debtors. Indeed, by reducing the risk to creditors in this way, standstills should be mutually beneficial to both parties. If that is the case, there is no reason to believe that, in a world of structured standstills, there is much risk of the golden-egg-laying goose being cooked. Second, might the prospect of standstills prompt a pre-emptive rush for the exits? In a world of structured standstills, there is perhaps some risk of skittish investors rushing for the exits sooner.

Since the mid-1990s, a main purpose of the economic policy framework has been to shelter the economy from fluctuations in oil prices. The set-up of the Government Pension Fund Global and the fiscal rule for petroleum revenue spending is one important defence mechanism in this context. The government’s net cash flow from the petroleum industry is transferred in its entirety to the Government Pension Fund Global. A transfer from the Fund to cover a non-oil budget deficit requires a decision by the Norwegian parliament. In addition to preserving the real value of the Fund for the benefit of future generations, this set-up insulates the budget from short-term fluctuations in petroleum revenues. It also leaves space for fiscal policy to counteract economic downturns. In effect, since 2013, the increase in oil revenue spending has roughly matched the fall in oil investment. Monetary policy has also played a role. Our monetary policy is oriented towards low and stable inflation. The operational target of monetary policy is annual consumer price inflation of close to 2.5% over time. Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment. With confidence in the inflation target among economic agents, monetary policy in Norway has been able to contribute to stabilising the business cycle. Lower income from oil exports following the fall in the oil price meant cost-competitiveness needed to improve. A floating exchange rate greatly facilitated this process.
All indicators, from the matching process on the labour market to the reallocation of resources among firms, have shown how serious the shocks from the great recession have been, vindicating a large-scale and determined reaction of economic policy across the world. In this global economic policy reaction, it would be hard to argue that central banks have not done their share of the job. At the current juncture, however, all need to do their share. Focusing on the euro area, I am convinced that we would do much better with more growth-enhancing fiscal policies, especially in the member states that have fiscal space, and, at the same time, more ambitious structural reforms, especially in the member states that don’t have fiscal space. Indeed, this is probably the most subtle criticism of the active monetary policy currently undertaken by central banks: has it been an excuse for inaction by other public authorities, in particular structural reforms? Our answer cannot be to stop doing our own job but, drawing on the legitimacy given by our own actions, to strongly invite governments to do more. In particular in my own country, here in Paris, reforms are necessary, as I stressed in my recent Letter to the French President some days ago. But reforms are also possible. Yes, France too, like many of its successful European neighbours, is “reformable”. I thank you for your attention and wish you an excellent dinner. BIS central bankers’ speeches  5

Ravi Menon: MAS' Annual Report 2016/17 Remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at MAS' Annual Report 2016/17 Media Conference, Singapore, 29 June 2017. * * * Ladies and gentlemen, good morning. Welcome to MAS’ annual report media conference. GLOBAL ECONOMY The global economy is in better shape than it has been in a long while. Economic growth is on a positive momentum. IMF has projected global GDP growth for 2017 to hit 3.5%, a marked improvement from the 3.1% last year. Growth is more broad-based, across both advanced and emerging economies. Growth in the major markets — the US, Eurozone, Japan and China — is experiencing a synchronised upturn. For the first time since 2014, all the major regions of the global economy — making up more than 90% of world GDP — are poised for a stronger growth outturn compared to the previous year. Global trade is recovering, on the back of a pick-up in manufacturing activity and bottoming of commodity prices. World merchandise trade volume is projected to grow by 2.4% this year, almost double last year’s growth rate. The JP Morgan Global Manufacturing Purchasing Managers’ Index (PMI) has been registering readings of above-50 for 15 consecutive months now. Economic expansion in the US is becoming more entrenched. The IMF has forecast GDP growth of 2.1 %. This is a credible projection, based on the resilience of private consumption and an incipient pick-up in private investment; it does not assume a large fiscal stimulus.
On the other hand, budget revenues for this period were down by 2.9% on a year earlier, reflecting the weak performance of tax revenues. These developments are materialised in a significantly increased budget deficit, which turned out to be twice higher than a year earlier. The budget deficit dynamics was reflected in a higher public debt over this period. At the end of the first quarter, the public debt as a share of GDP accounted for 63.3%. The public debt constitutes one of the major weaknesses of the Albanian financial system. Therefore, the Bank of Albania suggests that taking immediate measures to control this debt would contribute significantly to reducing uncertainties and risk premia in the economy. Taking advantage of the opportunity, we reiterate the need for putting in place a reliable and transparent fiscal rule. This is the best way to discipline the fiscal policy and preserve the trust of financial markets about the Albanian public debt in the long run. Data on the external sector of the economy show that foreign demand contributed positively to Albania’s economic growth and to trade deficit narrowing during the first half of the year. This behaviour was due to the 17.4% annual growth in exports and the 6.3% annual decline in imports over the same period. Consequently, the trade deficit dropped 22.2% over this period. The insofar adjustment of the trade deficit is a positive development of the Albanian economy. However, this deficit reduction is heavily thanks to transient factors.

Our history and that of the region is paved with stabilization measures based on the exchange rate, which generated severe setbacks, and ended in balance of payments crisis, financial turmoil and economic disasters. For this reason, we have evolved into a floating exchange rate regime, which permits to better reconcile the stability of the Chilean economy with the volatility of the external scenario. This is not the time or the place for a lengthy discussion on the subject; suffice it to recall that every economic crisis in Chile over the past fifty years – except the recession of 2009 we are leaving behind with unprecedented vigor – have been associated to exchange rate misalignments and rigidities. Furthermore, a very significant element to explain why the emerging economies were spared the worst effects of the recent global crisis was that their currencies floated, which allowed them to absorb the shocks, eliminated the invitation to investors to wager against currency weakening and opened room to relax monetary policy and provide liquidity. However, although a floating exchange rate has many advantages for economic and financial stability, it may happen that, at times of high uncertainty or excessive optimism, financial flows could persistently push the real exchange rate away from its medium- and long-term fundamentals, with negative effects on the economy. In such situations, the Central Bank may intervene in the foreign exchange market with the purpose of mitigating or eliminating these imbalances.
Any separate group-service companies need to maintain sufficient capital and liquidity to continue to support the principal operating companies before they are wound down or sold to third parties. And it would probably be useful to have governance arrangements that give some form of control rights to the operating companies over the service companies during that transition. In broad summary, it will be apparent that, even once the statutory resolution regime is in place in all key jurisdictions, many financial groups are going to need to restructure themselves in order to achieve resolvability – financially, legally, organisationally. Indeed, a group’s choice of financial and operational structure will influence which of a SPE or MPE resolution strategy is preferred by the home and key host authorities. These will be bespoke restructurings – and will be on top of the plans for systematic structural reforms of banking around the world (Vickers, Volcker, Liikanen, and so on). Cross-border co-operation The final precondition for success I want to highlight is, of course, effective cross-border co-operation. For a SPE strategy, successful implementation will depend on the home authority providing assurances to the key host authorities so that they refrain from taking independent action. Instead the host authorities would rely on the home authority to give effect to a group-wide resolution and, where necessary under the law, would take local action to help the home authority. Host authorities are going to need to be clear about the assurances they need – ahead of time and during the execution of the groupwide resolution.

8  The trigger for statutory resolution would be, broadly, that the conditions for the group being authorised as a bank or dealer were no longer met and there was no reasonable prospect of repair. It should be underlined that what is described here is nothing to do with so-called ‘contractual bailin’, which has been a source of confusing distraction over the past year or so. ‘Contractual bailin’ typically refers to bonds that convert into equity or write down under a trigger establishes purely in the contract documentation. But if the trigger is the firm’s capital ratio dipping below a high threshold, the bond is in fact for recovery not for handling abject distress. If, at the other end of the spectrum, the trigger is falling below a low capital ratio, there can be no assurance that the firm would survive in the markets long enough for the bond to be triggered before the firm had to go into statutory resolution. And if the suggestion were that the contractual trigger should give the regulators discretion, most Resolution Authorities would want to avoid writing down or converting bonds outside the statutory resolution process, since that provides protections for creditors, and gives the RA protections and powers for the achievement of a clear statutory objective established by the legislature. Bailin is not about a specific type of bond – a so-called ‘bailin bond’ – but about the application of a statutory resolution power to bonds of any kind within a statutory resolution.
It is also a common pattern that a financial crisis is followed by several years of weak growth.2 I also noted at the July meeting that there was a tendency in the United States and Europe towards stagflation, with low growth and high inflation at the same time. Developments over the summer reinforce this image, but this does not mean that things will necessarily continue in the same way. …but developments in Sweden largely in line with the forecasts In Sweden we have received the first preliminary national accounts figures for the second quarter of this year, and new statistics for the labour market and inflation, for instance. GDP growth was slightly higher in the second quarter than we were counting on in July. Seasonally-adjusted quarterly growth came out at 1.0 per cent, against an expected 0.6 per cent. Although both domestic demand and exports were marginally weaker than the Riksbank had forecast, imports, which are a deduction item when calculating GDP, were even weaker. This means that GDP growth was slightly higher than expected. I expressed some concern at the monetary policy meeting in July that the second quarter would be weaker than our forecast in the Monetary Policy Report. This was not the case, which in itself is a good thing. But at the same time, more forward-looking indicators such as the purchasing managers’ index and the National Institute of Economic Research’s economic tendency surveys point to economic activity slowing down. This is something that we have already counted on.

Krona exchange rate, TCW index Index, 18 November 1992 = 100 160  160  155  155  150  150  145  145  140  140  135  135  130  130  125  125  120  120 115  115 04  05  06  07  08  09  10  11  12  13  14  Note. The outcomes are daily rates and the forecasts refer to quarterly averages. Data are updated with new outcomes after the publication of the July Monetary Policy Report. Source: The Riksbank  14  BIS central bankers’ speeches
Accordingly, just as a resolute shortterm fiscal response will help lessen future damage to our economy, we should accept that a greater budgetary impulse at present should be part of a clear strategy to redress public finances. This is particularly necessary in countries, such as Spain, that face this crisis from a vulnerable public finances starting position, owing to high public debt and structural deficit levels. This strategy should rest on a medium-term budgetary consolidation programme which, through a spending and tax structure and capacity review, will help restore health to public finances. It should also be underpinned by a structural reform programme that raises the economy’s growth capacity and, therefore, broadens the tax bases needed to fund the desired level of expenditure. This fiscal consolidation and structural reform strategy should be implemented once this episode and its economic effects are behind us. But its design and communication should not be delayed. In the short run, there is no place for a premature withdrawal of the emergency fiscal measures, since that would increase the risk of more lasting damage to economic growth. However, the necessary counterpart to this fiscal activism is the early announcement of a strategy to reduce fiscal imbalances, with a view to its subsequent implementation, which should perforce be gradual. An early definition of this strategy would significantly benefit the credibility of our economic policy and help boost the expansionary effects of the current fiscal measures.

But what should not be in doubt is that the MPC will take whatever steps are necessary in order to keep inflation on track to meet the 2.5% target. The challenge for monetary and fiscal policy is to restore domestic demand growth to sustainable levels. This would permit the stabilisation and eventual reduction of the trade deficit, while maintaining  2  BIS Review 26/2002  low and stable inflation, and high and stable employment, at the same time as resources move from private consumption to the provision of better public services. It is possible, perhaps likely, that the transition to lower growth rates of consumption will occur smoothly. And lower inflation now than in the past may ease the adjustment - the future is not what it was. For the Monetary Policy Committee the challenge is to keep inflation close to the target during a period in which a significant re-balancing of the British economy will take place. That will be a challenge, not just for the MPC, but for all of us. BIS Review 26/2002  3