samchain/econo-pairs-v1 huggingface dataset:
Lars Nyberg: Monetary policy and financial crises – some reflections Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Danske Bank, Stockholm, 21 December 2011. *  *  *  On the first of January 1999, thirteen years ago, Sweden gained a new central bank act. Six people were given the privilege of independently deciding on something that interests almost everyone in Sweden, namely the interest rate. These six people were forbidden to take instructions from anyone – that is, politicians – and it was also forbidden for outsiders to give them instructions. I had the privilege of being one of the six who started in 1999, and I have thus been here ever since. This means that I have been a member of the Executive Board more than twice as long as any of the other current members and more than four years longer than any other person who has been on the Board. Whether this longer experience is then reflected in a correspondingly greater wisdom on central bank-related matters is of course less certain. In any case, I shall leave this to others to decide. An eventful period But there is no doubt that these thirteen years have been eventful. There have been the usual cyclical ups and downs, but also a number of crises in various parts of the world and, of course, the global financial crisis and the ensuring sovereign debt crisis that we are currently in the midst of.

It has broadened its representation and established three sub-committees, which deal with issues ranging from market practices and product development to training and education. The Committee also expects to adopt a higher profile – for example, through the publication of standard documentation and promotional literature, and by organising seminars of the kind that we are having today. 3. The reconstructed MPC has already begun to show achievements. Some of its contributions may seem a little quaint, such as its work in formulating a set of standard typhoon and rainstorm procedures for settling foreign exchange and money market transactions under extreme weather conditions. But just imagine the chaos and confusion if everyone were to adopt a different methodology for interest calculations and use a different date to settle the trades every time the markets close down because of bad weather. The MPC has also been advising the HKAB on other payment and settlement standards. Again, the advice given may seem insignificant or prosaic, like the creation of a standard format for the settlement code needed by participants in our new US dollar clearing system; but it is often tiny creations like this one that go a long way towards strengthening efficiency in payment and settlement systems. 4. Apart from this “domestic” work, the MPC has also served as a window connecting the local forex and money market industry with the outside world. It has already started to strengthen its ties with overseas foreign exchange committees.
Giving weight to output implies that inflation is brought back to target somewhat later. The consideration of a steady interest rate course suggests that small, temporary disturbances should normally not result in abrupt shifts in the interest rate. If this consideration is also given weight in interest rate setting (criteria 1, 2 and 3), the impact on the interest rate will be smaller. If we also give some weight to the interest rate given by a simple monetary policy rule – the Taylor interest rate rule (criteria 1, 2, 3 and 4), the key policy rate will remain at today’s level for a period and then be raised gradually. This results in a further small downward shift in the projections for inflation and the output gap and is consistent with the projections in the previous Monetary Policy Report. The projections for inflation and economic activity vary from one Report to the next. Hence interest rate prospects will also change. In our Reports we attempt to illustrate which factors have influenced the changes in the interest rate forecast through their effects on the prospects for inflation, output and employment. 1  A simple rule can function well under alternative models for the economy. The type of uncertainty we want to be robust to will determine what the best rule will be.

4  BIS Review 113/2010  Change in interest rate forecast over time  The interest rate forecast is an expression of a balance between various monetary policy considerations and a response pattern that households, firms and financial institutions can build on. The interest rate forecast is based on our understanding of the functioning of the economy. The uncertainty surrounding the interest rate forecast is highlighted in our fan charts with uncertainty intervals around the interest rate forecasts. The forecasts have shifted considerably over time. This reflects that the interest rate is an instrument that should react to all news that may influence the inflation outlook. Publication of interest rate forecasts – how does the market react? When we started forecasting the interest rate in 2005, we could refer to the experience of New Zealand 2, which had just experienced pronounced shifts in the interest rate and interest  2  The chart is from Archer, D. (2005): “Central-bank communication and the publication of interest rate projections”, presented at Sveriges Riksbank’s conference: “Inflation targeting: implementation, communication and effectiveness”: http://www.riksbank.com/templates/Page.aspx?id=15814. BIS Review 113/2010  5  rate forecasts. The chart illustrates that we were not able to anticipate the financial crisis in autumn 2008, but have otherwise been on track. Our latest interest rate forecast suggests that the interest rate will remain low for a long period. But we also note that market participants believe it will take even longer for the interest rate to move up to a more normal level.
For instance, Zambia, has successfully managed to stabilize the key macroeconomic variables. For the first time in 30 years, inflation managed to fall to its lowest levels while the exchange rate has been relatively stable whilst reflecting market fundamentals. Further, the lending interest rates have been declining in response favorable macroeconomic environment. Notwithstanding the improved macroeconomic environment, the Zambian Government is aware and committed to resolving the remaining challenges facing the banking and financial services industry. Accordingly, Government adopted a 5-year Financial Sector Development Plan (FSDP), which aims, amongst other things, at promoting the development of a stable, sound and market based financial system. One of the key recommendations of the FSDP is establishment of a credit reference bureau in order to improve the credit culture in Zambia. In June 2006, the Bank of Zambia licensed one company to provide credit referencing services and commercial banks are concluding a service level agreement with this company that will allow the bureau to serve as a clearinghouse for credit history information and promote the ability of lending institutions to share both positive and negative data about their borrowing customers. BIS Review 36/2007  1  Ladies and Gentlemen, this development will address one of key structural problems that the baking sector has faced for a long time.

Caleb M Fundanga: Overview of Zambia’s banking sector Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, on the occasion of the 10th Anniversary of Bank of China (Zambia) Limited, Lusaka, 13 April 2007. *  *  *  • His Excellency – the Chinese Ambassador to Zambia; • Vice-President of the Bank of China – Head Office; • Chairman of the Board of the Bank of China (Zambia) Limited; • Managing Director of the Bank of China (Zambia) Limited; • Distinguished invited guests; and • Ladies and gentlemen Let me first express my sincere gratitude for having been invited to speak on the occasion of the 10th anniversary of the Bank of China (Zambia) Limited. Ladies and Gentlemen, during the last ten years, the performance of Bank of China has been satisfactory with total assets steadily increasing to K391.4 billion in December 2006from K6.4 billion in December 1997 and total deposits increasing to K294.2 billion in December 2006 from K2 billion in December 1997. On this basis, Bank of China had grown to become the eighth largest bank in Zambia albeit operating with only one branch. Bank of China (Zambia) is a 100% subsidiary of Bank of China which went through a successful initial public offer (IPO) and has resulted in Bank of China being a top tier globally listed bank. Over the same period in Zambia, the overall financial performance and condition of the banking sector has been satisfactory.
In Sweden, by contrast, the demand for cash has fallen sharply in recent years and the central bank is actively considering the costs and benefits of issuing its own ‘e-krona’: see for instance http://www.riksbank.se/en/Financialstability/Payments/Does-Sweden-need-the-e-krona/. 5 Similar themes were recently also highlighted by Christine Lagarde, Managing Director of the IMF, at the Bank of England’s conference on monetary policy independence, 20 years on: https://www.imf.org/en/News/Articles/2017/09/28/sp092917-centralbanking-and-fintech-a-brave-new-world. 6 See for instance the Governor’s speech in April 2017: http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech974.pdf, a compendium of the Bank’s work on digital currencies: http://www.bankofengland.co.uk/research/Pages/onebank/cbdc.aspx, and the recent report by the Financial Stability Board: http://www.fsb.org/2017/06/financial-stability-implications-from-fintech/. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Now these clearly aren’t the goals of traditional private sector accelerators, which aim to make money by helping nascent businesses refine the design of their products in ways likely to attract both investors and customers. We make no financial investment in the firms we work with. But we do I think share the 7  underlying objective of ‘accelerated mutual learning-by-doing’ – since central banks are likely to be key stakeholders for many forms of FinTech over the medium term, both in shaping the rules that bear on them, and as technology users.

TABLE 1 THE BANK AND PRIVATE SECTOR ACCELERATORS COMPARED  Purpose  Duration of firm engagement Business model  8  Private sector  Bank of England (BoE)  accelerators  accelerator  To help ventures define and  To work with innovative firms,  build initial products and  helping them to understand  identify consumers and  the BoE’s needs, and the BoE  investors  to understand the technology  3-6 months  1-3 months  Investment in successful firms (can also be non-profit)  Non-profit, no equity taken  Selection  Competitive, in cohorts  Competitive, in cohorts  Venture Stage  Early  Generally later stages  Structured programme  PoCs structured according to  similar for all firms in the  central bank use cases and  cohort, culminating in a  success criteria. No  demo day  comparison between firms  Programme  Resourcing and Mentorship Venture location  Primary resourcing from start-up staff but with support from mentors  Start-up staff work with BoE subject matter experts  On-site  Mostly off-site  In other respects, the Bank’s Accelerator operates in a similar way to traditional accelerators (Table 1). We undertake structured Proofs of Concept (‘PoCs’), organised in cohorts to ensure appropriate resource allocation and focus. Firms are chosen through an open, competitive selection process on the basis of a well-defined central banking use case. They work closely with the Bank’s subject matter experts for a time-limited period.
Of course, the role of financial intermediation is not limited to supporting start-ups. As a matter of fact, the seamless availability of a wide range of financial functions would best serve innovation-led economic growth. In the Asian context, channeling the region’s abundant savings to the vast demand for infrastructure is also an important challenge in which I myself was deeply involved when I was President of the Asian Development Bank. Developing bond markets has been one of the successful initiatives in terms of intra-regional matching between savings and investment. 17 Bond markets in Asia, especially those denominated in local currencies, have grown significantly since the mid-2000s, thanks to the efforts of the relevant financial authorities and other bodies. At the end of 2013, outstanding bond issuances amounted to 3.5 trillion U.S. dollars, which is about five times the figure for 2005. Turning to retail financial services, inclusiveness, which I mentioned a little while ago, is again an important issue. We should note that a significant number of people in Asia still do not have their own bank accounts. 18 Less than half the population in India has a bank account. China fares better, with the proportion of account holders being two-thirds of the population, but that is still far from the situation in advanced economies where almost everybody has access to a bank account. I believe that the Asian financial landscape, and  13  Daron Acemoglu and James A. Robinson, Why Nations Fail: The Origins of Power, Prosperity and Poverty, Crown Business, 2012.

10 It is also encouraging to see that an increasing number of Asian universities have become recognized as top-tier at a global level. According to some recent university rankings, more than ten universities in Asia are among the best 100. 11 Remember that the success of Bangalore also lies in the fact that local IT firms were able to recruit many highly skilled graduates from nearby universities. Against these backdrops, Asian has made larger contributions to the development of science. For instance, the share of Asian born Nobel prize winners in scientific fields doubled to more than 10 percent after the turn of the millennium. 12 These truly top academic scholars have influenced the development of human capital in their own countries in various forms as exemplified by Professor Sen himself in front of us. The second key to higher productivity is a market-friendly business environment. For example, a critical precondition for market functioning such as property rights protection, or the rule of law more generally, is an indispensable ingredient for an innovative environment, which in turn is the basis for productivity growth. I firmly believe, as many economists do, that  10  Enrico Moretti, The New Geography of Jobs, Mariner Books, 2013. 11  See, for instance, Times Higher Education World University Rankings. 12  Nobel prizes in the areas of physics, chemistry, physiology or medicine, and economic sciences.
As Mario Draghi stressed, “there should be a good case for monetary policy”7 for the euro area as a whole: our policy cannot be designed according to the specific needs of some banks or jurisdictions. And secondly, we should look at the whole spectrum of possible tools, including various forms of LTRO, to decide about the recalibration of conditions and maturities. Regarding interest rates, I have often stressed in the past the usefulness but also the obvious limits of negative interest rates. Let me quote what I said as early as 2017: “they are difficult to accept by households and SMEs, and so impossible in practice to pass through to them”8. And thus they are believed by many, if maintained for too long, to weigh negatively on the profitability of financial intermediation with possible adverse consequences for the smooth transmission of monetary policy. Hence, if we had to use negative rates for a longer period than expected, we should study pragmatically how to contain their possible adverse effects on the bank transmission of our monetary policy. 3. Relentless efforts towards a stronger Europe Let me come back to the European spirit I pleaded for. Today, it is also an economic requirement: faced with the slowdown and the uncertainties, monetary policy cannot be the only game in town. This is a German worry I fully share with many others. But then, we need to push relentlessly for a strengthening of our Economic Union. The commitment of Mario Centeno, as Chairman of the Eurogroup, is essential.

Other major 1/6  BIS central bankers' speeches  central banks such as the Fed and the Bank of Japan followed the example of the ECB, in 2012 and 2013 respectively, and also adopted the same 2% inflation target. This “conceptual convergence”3 is remarkable. With regard to our mandate, the results are tangible [slide 1]. During the 20 year period prior to the introduction of the euro (1979-98), average inflation in the euro area was at 4.9%, compared with only 1.7% during the 20 years that have followed. What’s more, better controlled inflation means lower financing costs as risk premia are reduced: interest rate differentials and sovereign spreads have narrowed significantly [slide 2]. The France-Germany spread fell from an average of 1.9% between 1986 and 1993 – the period of the single market without a single currency, between the Single European Act and Maastricht – to 0.4% in 2017-19. The Portugal-Germany spread narrowed by 5.5 percentage points over the same period. Furthermore, in terms of growth [slide 3], and unlike a common misperception, euro area per capita GDP has improved almost as rapidly as in the United States since the euro was introduced. It increased at an annual average of 1.1% between 1999 and 2017, compared with 1.2% in the United States, with the gap between the two widening only temporarily during the 2011-12 European crisis. 2.
Tony Latter: Preserving monetary stability in the face of budget deficits Speech by Mr Tony Latter, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Insight Investment conference in Hong Kong, 20 November 2002. *  *  *  Introduction There has been much talk recently in Hong Kong about the possible threat to exchange rate stability from the burgeoning budget deficit, which is predicted by many to reach about 6% of GDP for the current financial year as a whole. Evidence of this concern is apparent when any media report suggesting a deterioration in the fiscal position is invariably accompanied by a weakening, even if shortlived, in the forward exchange rate of the HK dollar. This phenomenon is not confined to Hong Kong. In Europe, news of widening budget deficits, threatening to breach the terms of the stability and growth pact, and allegations of lack of commitment among officials to the degree of fiscal discipline necessary to conform to that pact, have tended to weaken the euro's exchange rate, at least temporarily. But there is another story which can be told. This is of an economy where the budget deficit rose from about 1½% of GDP to 4½% in the space of 4-5 years. What happened to its exchange rate? It strengthened over the same period by some 70% in trade-weighted terms. The authorities reined in the deficit somewhat over the next couple of years, but then it began to expand again.

Despite the recent more encouraging signs, we continue to expect underlying growth to remain sluggish in the first half of the year (the actual data are likely to move somewhat erratically because of the extra holiday associated with the Queen’s Diamond Jubilee). But inflation has been falling sharply, down from its peak of 5.2% in September to 3.6% in January and is likely to continue declining as increases in energy prices a year ago drop out of the calculation. That means that the long-lasting squeeze on household real incomes is also starting to ease. In turn, that should facilitate a modest pickup in household spending;  1  Banks do act as intermediaries in the transactions, but it is the behaviour of the ultimate seller that matters for the economic impact. 2  BIS central bankers’ speeches  the upbeat retail sales figures announced at the end of last week may be a sign this is already starting to happen. But while growth should gradually strengthen, the continuing headwinds from the unwinding of excessive debt and the Government’s continuing fiscal consolidation mean that the pace of recovery is likely to remain moderate by historical standards. As a consequence, a margin of unused capacity and labour in the economy is likely to persist for some while yet, helping to ensure that domestically generated inflation – presently running around 1½%, depending on exactly how one chooses to measure it – should stay subdued.
My assessment was then that our main scenario, with a decline in GDP in the world of around 1 per cent this year and an increase of just over 2 per cent next year was reasonable. But at the same time I considered that there was a risk that the recession would even be deeper and more protracted than we predicted. My reasoning was based on the fact that recessions that arise as a consequence of financial crises and recessions that are synchronised between several countries are normally followed by slow recoveries. Sweden was in a severe recession in April and we are still. We were assuming a fall in GDP of around 4.5 per cent this year and a weak recovery next year. As in the case of international developments, my assessment was that on balance the predominant risks were that the recession could be deeper and more prolonged. CPI inflation was expected to be negative this year, but underlying CPI inflation with a fixed interest rate, the CPIF, was expected to be close to 2 per cent throughout the entire forecast period. In my opinion, there was no reason to worry about deflation and no reason to worry about high inflation. We decided to cut the policy rate to 0.5 per cent. Today I would like to take up two questions in the current situation that are linked to monetary policy. These are the link between resource utilisation and inflation, and the limits for stabilisation policy.

We must try to make the best possible assessments of the amount of resources that will disappear more permanently as a result of  4  For a more detailed analysis of this connection, see Adolfson, M. and U. Söderström (2003), “How is the economy affected by the inflation target?” Economic Review 1, pp. 49-63, Sveriges Riksbank. http://www.riksbank.com/upload/Dokument_riksbank/Kat_publicerat/Artiklar_. PV/er03_1_artikel3.pdf. BIS Review 66/2009  7  the recession and of how quickly output can increase without causing inflation problems. Otherwise there is a risk that we will conduct an expansionary monetary policy for too long and thus risk inflation problems later on. One necessary condition for conducting effective monetary policy is that the financial system functions. Since last autumn the Riksbank has taken a number of measures to safeguard financial stability, in particular the extensive lending to the banks. We have recently decided to extend the eligible counterparties for our monetary policy operations and to offer the banks the opportunity to borrow from the Riksbank not merely at maturities of three months and six months, but also at twelve months. If economic developments should prove to be much worse than we are now predicting, there may be reason to proceed with more unconventional measures to support the economy. One possibility is to do as they have in a number of other countries and purchase government, mortgage and corporate bonds. We are currently examining the experiences of other countries and analysing the advantages and disadvantages of this type of measure.