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Welcome to the Central Bank Insider Archives. We are pleased to be able to provide you with this intimate look at central banking events, policies, and staff. Commentary is updated as available (generally bi-weekly) and archived monthly. The source commentary "Newsmakers" is reprinted at USAGOLD with permission and by courtesy of Central Banking Publications Ltd.
26 October 2000
CENTRAL BANK NEWS
* Polish central banker resigns
* BoE's George says euro substantially undervalued
* Yugoslavia eyes quick readmission to IMF
* Colombia central bank sees 2000 inflation 8.5% - 10%
* Thiessen pushes for debt standstills
* Buenaventura says credit downgrade was harsh
* Iran bank governor says debt repayment will lower rates
* Ukraine central bank council backs strong currency
* Sabirin Sjahril to go on trial quickly
* Jarai could replace Suranyi as central bank governor in 2001
* Bank governor says no Milosevic accounts in Cyprus
* Bank governor outlines core fiscal policy
* Transparency drive at Bank of Japan
* Yemen governor counts oil blessings
* SARB gets new power on reserves
* Russian central bank in role cut
* Bank of France warns on 35-hour week
* John Nugee leaves Bank of England
* Women in central banks (update)
* Viewpoint: Latin America: Future Inflation Convergence
PAYMENT SYSTEMS
* Papers on payments systems and financial stability
* Changing Technology and the Payment System
WEBSITE CORNER
* Brand new CNB site
* Grahambishop.com
* Bank of Sudan
PAPER OF THE WEEK
* Market Based Approach to Maintaining Systemic Stability
* Identifying Policy-makers' Objectives
* Reserve Management, Transaction Costs, and Timing of Intervention
* Indicator Variables for Optimal Policy
* Papers by E Philip Davis
BOOK OF THE YEAR!!
Monetary Policy Frameworks in a Global Context
**************************************
CENTRAL BANK NEWS
**************************************
Polish central banker resigns
October 20
Hanna Gronkiewicz-Waltz announced
she would leave the central bank in January to become a deputy
head of the European Bank for Reconstruction and Development (EBRD).
President Aleksander Kwasniewski, who must propose candidates
for the post to parliament, said he was choosing from seven or
eight internationally respected economists. His proposal has to
be approved by a majority in the fractured parliament. Kwasniewski
said the group included presidential economic adviser Marek Belka,
former finance minister Leszek Balcerowicz and two members of
the central bank's monetary policy council - Boguslaw Grabowski
and Dariusz Rosati.
**************************************
BoE's George says euro substantially undervalued
October 24
Bank of England governor Eddie
George said in a speech in Paris on Tuesday, "The euro is
substantially undervalued in terms of the medium-term 'fundamentals',
so in the same way sterling is on most calculations substantially
overvalued against the euro. For the time being our best bet,
it seems to me, is for both the Eurozone and the UK to continue
to pursue macroeconomic - both fiscal and monetary - stability
in parallel, and to hope that the euro recovers, as I continue
to expect that it will".
**************************************
Yugoslavia eyes quick readmission to IMF
24 October
Yugoslavia and the IMF agreed
on Tuesday on steps which would allow the country to rejoin the
Fund and get some financial help for future reforms. Yugoslavia
was expelled from the Fund in 1992. However, Mladjan Dinkic, who
is informally performing the duties of central bank governor,
said, "There are three fundamental preconditions we must
meet before we restore membership with the IMF. One is legal,
one political and one economic."
**************************************
Colombia central bank sees 2000 inflation 8.5% - 10%
October 23
Colombia's central bank said that despite high world oil prices, the country is on track to meet the 10% inflation target for this year agreed with the International Monetary Fund.
"It's one of the big successes
of the year that Colombia will achieve its inflation goal even
with gasoline prices so high," said central bank governor
Miguel Urrutia at a press conference. The bank's quarterly inflation
report said its models show inflation for the end of the year
coming in at between 8.5% and 10%, compared with its prediction
in May that inflation would be between 9% and 11%. For the first
nine months, consumer price inflation was running at 7.7%. The
report also detailed a survey of investment banks, risk-rating
agencies and analysts on what they predicted for inflation in
2000 and 2001. The groups predicted that inflation on average
will be at 9.8% for 2000 and will increase to 10.7% in 2001, higher
than the central bank's models. "We report on their predictions
so we can see how wrong they were," said Urrutia, smiling.
"I'm very diplomatic, no?"
**************************************
Thiessen pushes for debt standstills
October 24
At the G20 meeting in Canada,
bank governor Gordon Thiessen, proposed the idea of debt standstills
to provide a "breathing space during which debt service can
be re-scheduled". Bailouts for countries in crisis should
be limited, Mr. Thiessen said. And clear rules about how to handle
crises should be established so that all investors, governments
and international financial institutions can know what to expect.
Part of that framework should be an allowance for standstills
or temporary suspensions of debt payments while creditors and
debtors work things out. "Standstills should not be construed
as a way of relieving debtors of their obligation to service their
debts. I see them, rather, as a crisis management device,"
Mr. Thiessen said. His idea was received rather sceptically. Mexican
central bank governor Guillermo Ortiz said that imposing standstills
or any other new measures imposed by rich countries or international
financial institutions on emerging market countries such as Mexico
will only scare foreign capital away. "These approaches that
involve the private sector in crisis resolutions ... are not very
effective," he said. "And they may explain why to some
extent we are getting a further reduced base of investors in emerging
market countries."
**************************************
Buenaventura says credit downgrade was harsh
October 20
The Philippine central bank said on Friday the move by Standard & Poor's to downgrade its long-term outlook on the Philippines to negative from stable was harsh.
"It was rather harsh given
the Philippines has a democratic process for change. To say there
is uncertainty is exaggerated, because obviously political solutions
will be found and none of these will be violent means," central
bank governor Rafael Buenaventura said. S&P on Thursday revised
its long-term outlook on the Philippine to negative, and warned
that the attempt to impeach President Joseph Estrada amid bribery
charges may affect the country's credit worthiness.
**************************************
Iran bank governor says debt repayment will lower rates
21 October
Governor of Central Bank of
Iran Mohsen Nourbakhsh said on Saturday that the total debts of
government and government-affiliated organisations stands at over
122bn rials and its repayment to the banking system will also
reduce interests charged by banks on loans. He added that currently,
the interest on deposits is eight to 18.5 per cent (in case of
long-term deposits) and every depositor expects at least to earn
the equivalent of inflation rate on bank deposits. Nourbakhsh
said the liquidity stands at 210,000bn rials, adding that over
half of the figure is in the hands of government and its affiliated
organizations. He also underlined that this is one reason for
the ineffectiveness of the banking system in providing inexpensive
credit to clients. **************************************
Ukraine central bank council backs strong currency
October 19
The head of the newly formed
Ukrainian central bank council said last Thursday that the body
would back a policy of a strong hryvnia currency and focus on
slowing inflation. "We will work constructively with the
(central bank) board on strengthening monetary and credit policy
and on strengthening the national currency," Anatoly Halchynsky
told a news conference. "We are backing a strong currency,"
he added after being elected to head the council for a three-year
period. Halchynsky, who is President Leonid Kuchma's economic
adviser, said the council was worried about the high pace of consumer
inflation this year and would focus on measures to slow it next
year. The central bank council was created to oversee Ukraine's
monetary and credit strategy while the central bank board will
be in charge of working out concrete steps. The central bank council,
a 15-member body, includes a mix of parliamentarians, economists,
government members, presidential advisers and the central bank
governor.
**************************************
Sabirin Sjahril to go on trial quickly
October 19
The Jakarta provincial prosecutor's
office will soon submit the dossier on suspended Bank Indonesia
governor Sjahril Sabirin to the Central Jakarta district court,
a prosecutor said last Wednesday. Andi Syarifuddin, assistant
prosecutor for special crimes, said Sjahril was charged with ordering
the reimbursement of a Rp904bn ($101.5m) interbank loan guaranteed
by the government in a move which has become known as the Bank
Bali scandal. The state prosecutors allege that Sjahril had given
an order between February and June of last year to his subordinates
to reimburse the loans using the government's bailout money despite
the fact that the central bank had yet to verify the money market
transactions between Bank Bali and three defunct private banks
- Bank BDNI, Bank Tiara and Bank Umum Nasional. The three banks
had earlier defaulted on their debts.
**************************************
Jarai could replace Suranyi as central bank governor in 2001
October 18
Finance minister Zsigmond Jarai
has the best chances to follow Gyorgy Suranyi in the position
of central bank governor next March, the Hungarian economic daily
Vilaggazdasag reported. The six-year mandate of central bank governor
Gyorgy Suranyi, who was appointed by the previous government,
will expire as of March 31, 2001 and it is widely believed that
the current government does not intend to extend it. According
to Vilaggazdasag, the government has already prepared a scenario
on selecting a successor, and the final decision will be taken
after the two-year central budget is approved by parliament at
the end of December. In addition to Mr Jarai, possible candidates
include deputy president of OTP Bank Zoltan Speder as well as
the bank's deputy CEO and head of the retail division Csaba Lantos.
According to the central bank act, the central bank governor is
appointed and dismissed by the president of the republic, at the
prime minister's proposal. However, the government said that the
appointment of the governor was not on the agenda.
**************************************
Bank governor says no Milosevic accounts in Cyprus
October 18
Cyprus' central bank governor
Afxentis Afxentiou last Wednesday described as "fairy tales"
reports that former Yugoslav President Slobodan Milosevic had
accounts in local banks. Afxentiou said anyone who possessed such
evidence should present it to the central bank for investigation.
He said it was not the first time such reports had appeared. "Those
who talk about Milosevic's accounts, should go and look in other
countries", he said, adding that the bank had carried out
investigations at the request of the International Court in The
Hague and that "nothing was found".
**************************************
Bank governor outlines core fiscal policy
October 10
The core of the fiscal policy
for 2001 is to concentrate huge flow of cash outside the bank
operation or facilitate their flow through banks, said Bank of
Mongolia governor O. Chuluunbat at the parliamentary hearing of
the standing committee on economics. In order to do so, there
is a need to tighten the legal environment, avoid bad loans, develop
equity market, and issue new kinds of securities.
**************************************
Transparency drive at Bank of Japan
October 13
The Bank of Japan is to start
publishing forecasts for inflation and economic growth for the
first time, in an effort to provide greater clarity in monetary
policy, its policy board announced. The decision, which will take
effect at the end of October, marks the first significant change
in the central bank's monetary policy framework since it won its
independence
two years ago. However,
although some economists have called for clear policy targets,
Mr Hayami has so far rejected any suggestion that the bank should
introduce inflation targets.
**************************************
Yemen governor counts oil blessings
October 13
Robust oil prices have helped
boost Yemen's foreign reserves to a record high of $2.5bn. The
extra revenues are also speeding up economic reforms and the repayment
of the country's debts, central bank governor Ahmad Abdul-Rahman
al-Samawi said. He added that the windfall will be used to fund
Yemen's campaign to combat poverty and illiteracy in the country
of 17.5 million. Oil revenues are expected to reach $1.4bn by
the end of the year compared with $495m in 1999.
**************************************
SARB gets new power on reserves
October 13
The South African parliament
has given central bank governor Tito Mboweni a new lever of monetary
policy, giving him the right to change the definition of what
type of money commercial banks must hold as reserves. The South
African Reserve Bank Amendment Bill allows Mboweni to determine
from time to time what proportion of the notes and coins in banking
halls and vaults can be counted towards the minimum 2.5% of liabilities
that must be held in non-interest-bearing cash reserves.
**************************************
Russian central bank in role cut
24 October
The Central Bank of Russia will
guard its independence on monetary policy but may lose its autonomy
over commercial bank regulation, the country's finance minister
has said.
**************************************
Bank of France warns on 35-hour week
October 24
The Bank of France has thrown
its weight behind calls to ease the burden on companies introducing
the government-imposed 35-hour week.
**************************************
John Nugee leaves Bank of England
October 23
John Nugee, head of reserve
management at the Bank of England, has joined State Street Bank
in London as head of the official institutions group. New email
john_nugee@ssga.com. The new head of reserve management is Paul
Chilcott (Paul.Chilcott@bankofengland.co.uk).
**************************************
Women in central banks (update)
I want to thank anyone who sent
me an email suggesting additions to list of prominent female central
bankers that I included in the last "Newsmakers". If
you think of ones I have still missed out, please let me know:
BWELLER@CENTRALBANKING.CO.UK
* MaryAnn Hunter, Senior Vice President, Federal Reserve Bank
of Kansas City
* Natalya Alexeeva, First Deputy Board Chairman, National Bank
of Belarus
* Nailia Abdullina , Deputy Governor, National Bank of Kazakhstan
* Elena Kohutikova, Deputy Governor, National Bank of Slovakia
* Eva Srejber, Second Vice Chairman and Deputy Governor, Sveriges
Riksbank
* Kerstin Hessius, Deputy Governor, Sveriges Riksbank
* Tatiana Paramonova, First Deputy Chairman, Central Bank of Russia
* Ms Khadija Gassanova, Director of Accounting and Reporting,
National Bank of Azerbaijan
* María Elena Ovalle Molina, Member of the Board, Central
Bank of Chile
* Darcy Boyce, Deputy Governor, Central Bank of Barbados
* Sum Nipha, Deputy Governor of the National Bank of Cambodia
* Naeem Hussain Nigar, Head of the Legal Department, State Bank
of Pakistan
* Latifah Merican Cheong, Assistant Governor, Bank Negara Malaysia
* Lilian Bee-Lian Leong, Director, Investment and Treasury, Bank
Negara Malaysia
* Hooi-Eng Phang, Director, Economic Department, Bank Negara Malaysia
* Nor Shamsiah Mohd Yunus, Head of Bank Regulation, Bank Negara
Malaysia
* Norainy Mohd. Sahid, Head of Information Systems Supervision,
Bank Negara Malaysia
* Essah Yusoff, Head of Human Resources, Bank Negara Malaysia
* Mignon Wade, Senior Director, Bank Supervision Department, Eastern
Caribbean Central Bank
* Lydia Elliott, Legal Adviser, Governor's Office, Eastern Caribbean
Central Bank
* Ingrid Shortte, Director of Monetary Operations Department,
Eastern Caribbean Central Bank
* Elizabeth Tempro, Director, Communication Services Unit, Governor's
Office, Eastern Caribbean Central Bank
* Duangmanee Vongpradhip, Director of Human Resources, Bank of
Thailand
**************************************
Viewpoint: Latin America: Future Inflation Convergence
By Leonardo Leiderman, Deutsche Bank Research
Email: Leonardo.Leiderman@db.com
Latin American inflation is now well within single-digit territory, yet it is still higher than the inflation rates in advanced countries and in other developing regions. At the same time, there has been a major reduction in the degree of exchange rate pass through to prices. Looking ahead, most of the inflation targets that have been set by the authorities in the region imply the continuation of a gradual process of inflation convergence to the rates observed in advanced economies.
The present analysis leads to the conclusion that in order to achieve these inflation targets in the context of the ongoing recovery in the region, most countries will have to maintain a tight monetary policy, at least in the next two years. The tight stance of monetary policy will be reflected in relatively high short-term real interest rates and relatively strong domestic currencies.
Specifically, higher short-term
real interest rates may be needed in some countries, such as Mexico.
In other countries such as Brazil, the room for further monetary
easing will be limited. Over time, inflation convergence will
enable domestic interest rates to converge to the levels prevailing
in advanced countries (corrected for country and currency risk).
**************************************
PAYMENT SYSTEMS
**************************************
THE CONTRIBUTION OF PAYMENT SYSTEMS TO FINANCIAL STABILITY
In May this year there was a
high-level payment system workshop held by the BIS' Committee
for Payment and Settlement Systems in Mexico. It was only the
second meeting of the CPSS outside Basel, following the May 1999
meeting in Hong Kong. The workshop brought 29 institutions together:
as well as members of the CPSS, there were senior representatives
from Aruba, the Bahamas, Bolivia, Brazil, Chile, Colombia, Costa
Rica, Cuba, Guatemala, Mexico, Nicaragua, Peru, El Salvador, Trinidad
and Tobago, Uruguay and Venezuela. The workshop covered three
broad areas: international standards for payment systems and securities
settlement systems, retail payment systems and large-value payments.
Presentations were made by those listed below are the papers are
now available at http://www.bis.org/publ/cpss41.htm
John Trundle, Bank of England
Tomoyuki Shimoda, Bank of Japan
Gregor Heinrich, Bank for International Settlements
Martin Andersson, Sveriges Riksbank
Enoch Ch'ung, Monetary Authority of Singapore
Francisco Solis, Bank of Mexico
Carlo Tresoldi, Bank of Italy
Lawrence J Radecki, Federal Reserve Bank of New York
Martin Santema, Netherlands Bank
Reynaldo M Geerman, Central Bank of Aruba
Belkys Apolinar, Central Bank of Venezuela
Félix Germaná Matta, Central Reserve Bank of Peru
Daniel Heller, Swiss National Bank
Johan Pissens, National Bank of Belgium
Joaquín Bernal, Bank of the Republic
Denis Beau, Bank of France
Susana Zarruk de Muñoz, Central Bank of Nicaragua
Jean-Michel Godeffroy, European Central Bank
**************************************
"Changing Technology and the Payment System,"
By Jamie B. Stewart
http://www.ny.frb.org/rmaghome/curr_iss/ci6-11.html
**************************************
WEBSITE CORNER
**************************************
Brand new CNB site
The Croatian National Bank website (http://www.hnb.hr) has
been updated in a brand new format make it easier to access latest
news and statistics. Monetary statistics are available in excel
files. Ante Zigman, the website editor and head of the press office,
left the CNB on October 1 and is now chief economist at Reiffeisen
Bank Croatia.
**************************************
Grahambishop.com
Graham Bishop, who is one of the leading advisers on European
economic and financial issues has left Schroder Salomon Smith
Barney, where he has been for 17 years, and set up an independent
consultancy - http://www.GrahamBishop.com
**************************************
Bank of Sudan
Bank of Sudan launched its website
(http://www.bankofsudan.org) on 23 September 2000. For enquiries
contact Nagmeldin H. Ibrahim at the Bank of Sudan. Email FOREIGNDEBT@HOTMAIL.COM
**************************************
PAPERS OF THE WEEK
**************************************
A More Market Based Approach to Maintaining Systemic Stability
Email: David.Mayes@bof.fi
David Mayes at the Bank of Finland
has written an occasional paper for the Financial Services Authority
in London. It
explains how using more market discipline can help improve the
stability of the financial system.
It has a clear abstract and executive summary at the beginning.
Although published by the FSA, it is written from a central banking
point of view i.e. concern for the system and the consequences
of problems for society as a whole. It develops some ideas in
a couple of earlier Bank of Finland Discussion papers. While it
is aimed primarily at Europe it draws on New Zealand experience
and is relevant for all countries.
Download: http://www.fsa.gov.uk/pubs/occpapers/op10.pdf
**************************************
Identifying Policy-makers' Objectives: An Application to the
Bank of Canada
By Nicholas Rowe and James Yetman
Abstract: In this paper, the authors develop a new way to test hypotheses about policy-makers' targets, and we implement that test for Canadian monetary policy. If, for example, the Bank of Canada is using interest rates to target an inflation rate of 2 per cent and there is an 8-quarter lag in the effect of the interest rate on inflation, then deviations of inflation from 2 per cent should be unforecastable and uncorrelated with any information in the Bank of Canada's information set lagged by 8 quarters. This would imply that empirical causality tests of monetary policy on inflation could be very misleading. Our test indicates that there was indeed a major change in the Bank of Canada's objectives about the time when formal inflation targets were announced.
http://www.Bank-Banque-Canada.Ca/english/res/wp00-11.htm
**************************************
Banks' Reserve Management, Transaction Costs, and Timing of
Federal Reserve Intervention
By Leonardo Bartolini, Giuseppe Bertola, and Alessandro Prati
http://www.ny.frb.org/rmaghome/staff_rp/sr109.html
**************************************
"Indicator Variables
for Optimal Policy," September 2000,
By Michael Woodford,
Princeton and Lars Svensson, Stockholm University
Abstract: The optimal weights on indicators in models with partial information about the state of the economy and forward-looking variables are derived and interpreted, both for equilibria under discretion and under commitment. An example of optimal monetary policy with a partially observable potential output and a forward-looking indicator is examined. The optimal response to the optimal estimate of potential output displays certainty-equivalence, whereas the optimal response to the imperfect observation of output depends on the noise in this observation.
http://www.iies.su.se/leosven/papers/swind.pdf
For other papers by these authors,
it is well worth checking out their websites:
http://www.princeton.edu/~woodford/
http://www.iies.su.se/leosven
**************************************
Papers by E Philip Davis
To see papers by the Bank of England's E Philip Davis, visit his website at http://www.geocities.com/e_philip_davis/new.htm. He has written extensively on VaR modelling, stress testing and financial stability issues.
**************************************
BOOK OF THE YEAR!!
**************************************
Monetary Policy Frameworks in a Global Context
Edited by Lavan Mahadeva and
Gabriel Sterne
Email: Gabriel.Sterne@bankofengland.co.uk
Or: Lavan.Mahadeva@bankofengland.co.uk
A new highly recommended book has just been published by the Bank of England's Centre for Central Banking Studies. It must have taken an astonishing amount of work. As well as having some 20 papers by some of the leading experts in central banking, it includes one of the broadest-ever surveys of monetary policy framework characteristics, covering 94 monetary policy frameworks. Using comparative analysis it looks at policy targets, institutional arrangements, transparency issues, levels of accountability and independence. The data sets which this report has produced will be a revolutionary resource for future monetary policy research. The report seeks to identify where the search for best monetary policy practice has found common ground and also distinguishes the circumstances under which countries might choose frameworks which depart from the norm.
Governor of the Bank, Sir Edward George, who launched the book, said, "The analysis of this book should be of enormous value to professional economists and students alike, and the data that have been gathered are an excellent information source."
© Copyright 2002 Central Banking Publications. All rights reserved. Reprinted at USAGOLD by permission.
Benedict
Mander
Email: bmander@centralbanking.co.uk
Central Banking Publications Ltd
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