Interessante, para países já estabilizados, ou de macroeconômica relativamente estável. Era o caso do Brasil, tentativamente, entre 1994-99 e 2004-2005, depois a coisa degringolou, como todos sabemos...
Paulo Roberto de Almeida
Jens Weidmann
BIS e-mail alert, 13 June 2016
Welcome remarks by Dr Jens Weidmann,
President of the Deutsche Bundesbank and Chairman of the Board of
Directors of the Bank for International Settlements, at the Bundesbank
Spring Conference "Monetary, financial and fiscal stability", Eltville,
10 June 2016.
1. Introduction
Ladies and gentlemen
I would like to welcome all of you to the Bundesbank Spring Conference. It is a great pleasure to have you here.
An old joke about economics is that it's "the only field in which two
people can win a Nobel Prize for saying exactly the opposite thing".
But sometimes, it is also a field in which people say exactly the same
thing - and even Nobel-prize-worthy things - without having ever talked
to one another beforehand.
That was the case with Robert Mundell and Marcus Fleming - at least
if anecdote is to be believed. They conducted research on the same topic
- stabilisation policies for open economies; they worked at the same
institution - the IMF; and they came to basically the same conclusions.
But they did not join forces to produce the insights that form the basis
of our understanding of open-economy macroeconomics to this day.
One of the insights offered by what is known as the Mundell-Fleming
model is that you cannot have it all - a fixed exchange rate, free
movement of capital and an independent monetary policy - at the same
time. This insight came to be known as the impossible trinity. Our
conference today will not be dealing with the ramifications of this
trinity, although it remains the subject of academic debate, as the
research work by Hélène Rey, for example, shows.
Instead, it's another trinity, the trinity of monetary, financial and
fiscal stability, that is the focus of today's conference. And while
this trinity should not be an impossible one, the recent financial and
sovereign debt crises suggest that it might be a more improbable one
than everyone perhaps thought ten years ago.
Even if Robert Mundell and Marcus Fleming are counter-examples, I
think that economic research benefits from an exchange of views. More
often than not, it's discussion with others that produces a new idea or
uncovers a flaw in reasoning, whereas a breakthrough is seldom achieved
working alone.
What is true of economic research in general seems to be particularly
true of research on the interplay of monetary, financial and fiscal
policies, which is currently on the research agenda of so many different
institutions. As a case in point, the Deutsche Bundesbank initiated the
Trinity research network along with the Sveriges Riksbank, the Bank of
Canada and the Federal Reserve Bank of New York under the auspices of
Markus Brunnermeier (of Princeton University) and Eric Leeper (of
Indiana University).
The aim of the network is to foster high-quality research on this
topic and to boost interactions among the organising institutions as
well as external researchers. Consequently, this year's Spring
Conference is dedicated to the Trinity research network, and I am
absolutely confident that it will make an important contribution towards
achieving the aim of the network.
2. Monetary and financial policy
Ladies and gentlemen
In the years before the financial crisis, we had almost forgotten
that generations of economists had grappled with one central question:
how to achieve macroeconomic stability.
For many people, the success of the so-called "Great Moderation"
provided the answer to this question. Inflation had apparently been
conquered, and large swings in economic output seemed a thing of the
past as well. By keeping prices stable, central banks also appeared to
be able to moderate the business cycle, thereby providing for overall
macroeconomic stability.
In hindsight, it looks as if, for a while, confidence had turned into
complacency. But the financial crisis has reconnected everybody with
the reality that the success of monetary policy depends on conditions it
cannot create on its own. In particular, it is dependent on a stable
financial system. And as the sovereign debt crisis has reminded us,
sound fiscal policies remain as important as ever for monetary policy to
be able to deliver price stability.
In recent years, however, academic progress has been made on all
counts: with regard to the effects of unconventional monetary policy
instruments, the principles of a stable financial system and of sound
fiscal policies. And one additional insight is that, while the
instruments for these three policy areas are different, the areas are
nonetheless interdependent.
True to the adage that central bankers are concerned more with what
they cannot control than what they can, in my remarks I will touch upon a
few selected issues regarding monetary, financial and fiscal policy.
These are: the interdependency between the monetary transmission process
and financial market conditions, the minimum standards for bail-inable
capital, the distortions stemming from the privileged regulatory
treatment of sovereign debt, and the possible use of GDP-linked bonds as
a tool through which private investors would bear fiscal risks.
The financial crisis has shown in no uncertain terms that the
transmission of monetary policy depends heavily on financial market
conditions. When the financial markets were disrupted in autumn 2008
after the collapse of Lehman Brothers, the traditional interest rate
pass-through of our conventional monetary policy measures was obviously
hampered.
But even today, the effectiveness of our monetary policy depends on
financial market conditions. This can be illustrated, for example, by
the role asset managers play in how non-standard monetary policy
measures impact on longer-term interest rates.
Recent research by Morris and Shin1
suggests that, in trying to avoid ranking last in short-term
performance tables, asset managers' portfolio choices could lead to
large jumps in risk premiums in anticipation of small future changes in
central bank policy rates. Due to their own payment arrangements, asset
managers cannot usually afford to be the last to notice a switch in
monetary policy, because the financial loss in the funds under
management increases if many others try to sell their securities before
them.
Consequently, they might become increasingly nervous the longer
monetary policymakers try to maintain the low-interest-rate policy.
This, in turn, could raise the probability of a sudden hike in risk
premiums, the longer forward guidance is in place and the more
aggressively quantitative easing is pursued. Monetary policymakers have
to take this into account in order to avoid unintended consequences.
But it is not only the behaviour of asset managers that is relevant
to monetary policy. The crisis has reminded us that financial
exuberance, too, is potentially a harbinger of unstable consumer prices.
But this does not mean that monetary policy is the way to go in terms
of pre-empting financial instability as well.
Tinbergen's timeless insight continues to apply: to reach each policy
goal reliably, at least one separate instrument is needed for each
policy area. The crisis has therefore spawned a whole new set of
instruments - macroprudential policies - designed to target specific
sectors of the financial system. Rather than focusing on individual
financial institutions, macroprudential policies that seek to prevent
exuberance in entire financial sectors can take systemic
interdependencies into account.
What is a treasure trove for researchers - the host of questions
surrounding the functioning of the new set of instruments - is tricky
terrain for policymakers, and for central bankers in particular.
Shedding light on the use and effectiveness of different macroprudential
instruments therefore remains an eminent task of economic research, and
I am positive this conference will provide a valuable contribution.
Does this mean that monetary policymakers can ignore the financial
stability implications of their actions? I don't think so. While I am
not in favour of a dual monetary policy mandate, I am convinced that
monetary policy cannot stand on the sidelines when financial imbalances
build up.
First, we cannot be sure that macroprudential policies will eliminate
financial imbalances. The experience with macroprudential instruments
is still limited, and the toolkit is still incomplete.
Second, the crisis has vividly demonstrated how financial instability
affects inflation developments and the capacity of the central bank to
safeguard price stability. Therefore, monetary policy would be wise to
take the implications of financial imbalances for price stability into
account.
As a first line of defence, however, it is financial regulation that
has to bear the brunt of the financial stability burden. With regard to
traditional microprudential regulation, the direction for reform seems
clear: realigning risk and reward in a way that sets incentives for
sustainable action. Privatising gains and socialising losses is not only
socially corrosive: it also produces bad economic results, as financial
actors are encouraged to take on excessive risks.
A cornerstone of the international efforts to ensure the
resolvability of systemic banks is the standard for bail-in debt, the so
called Total Loss Absorbing Capacity (TLAC). It requires those banks to
hold a minimum of debt that can absorb losses in the case of a bank
resolution. This shields the taxpayer from footing the bill.
Europe already has a bail-in standard of its own, the so called
minimum requirements on eligible liabilities (MREL). For efficiency and
financial stability purposes, one could argue that TLAC and MREL should
be as similar as justifiable.
Systemically relevant banks pose a special challenge when it comes to
resolving them without creating substantial repercussions for the wider
financial system. For that reason, the Single Resolution Fund exists.
When resolving a systemic bank, the Single Resolution Board, which is
the relevant European authority, can draw on the resources of this fund -
but only after at least 8 % of the banks' liabilities have been bailed
in. It seems therefore sensible that MREL for systemically important
banks is guided by this threshold.
When it comes to bailing in creditors, the fear of contagion is
probably the most important reason for refraining from doing so.
Naturally, contagion risk is high when the creditors who are to be
bailed in are banks themselves. Currently, the MREL standards do not
discourage banks from holding another institution's bail-in debt. In the
interests of financial stability, this has to change.
3. Fiscal and financial policy
The importance of realigning risk and return has come to the fore
with regard to yet another issue: the research of Todd Walker and of
Sascha Steffen and Joseph Korte2
- both works will be presented at this conference - are examples of a
growing body of scientific evidence that the zero-risk weighting of
sovereign debt distorts capital allocation and therefore acts as a drag
on growth. The absence of exposure limits also encourages loading up on
sovereign debt, potentially creating cluster risks that can pose a
threat to financial stability as well.
The research is there; what is needed now are political results. The
regulation of sovereign exposures is under discussion at both the
European and the Basel level. And while progress at both levels is
desirable, it is particularly urgent in the euro area.
In contrast to other jurisdictions, the Eurosystem is forbidden to
act as a lender of last resort for governments. Such a function would be
tantamount to mutualising sovereign risk, which would be incompatible
with the decentralised Maastricht framework. The risk profile of
euro-area sovereign debt is therefore different.
Doing away with sovereign debt as a cluster risk would also pave the
way for the orderly restructuring of sovereign debt. If necessary, an
orderly restructuring would be possible without endangering the
stability of the overall financial system - and this would be good not
only for euro-area countries but for other countries, too. In this case,
financial risks would be borne by those who took them: the private
investors. But an orderly restructuring of sovereign debt is not the
only way in which financial market participants can be involved in
bearing fiscal risks in a structured way.
A recent initiative by the Bank of England is pushing for the
introduction of standardised GDP-linked bonds. By tying coupon payments,
and potentially the principal as well, to a country's growth rate,
investors share both the upside and the downside risk of a country's
economic development. That way, a country can potentially retain fiscal
space even when faced with adverse economic events. GDP-linked bonds
exhibit equity-like features, which of course gives rise to questions as
well.
How would a financial system cope with the fact that sovereign debt
would cease to exist as a "safe asset"? How many investors would be
interested in GDP-linked bonds and, leading on from there, how would a
GDP-linked bond be priced? These are the questions that need to be
answered before GDP-linked bonds can ever become a widespread vehicle
for transferring fiscal risks - upside as well as downside ones - to
private investors. But it is an avenue worth exploring.
Limiting fiscal risks, however, should be the first line of defence.
An effective mechanism to achieve this aim would be to pursue a sound
fiscal policy. This would also help to plug a constant source of
uncertainty, at least in the euro area. As Eickmeier, Metiu and Prieto3
show, this might help to increase the effectiveness of monetary policy
as well. When uncertainty is reduced, actors behave in a less
risk-averse manner, which heightens responsiveness to monetary policy
impulses.
The benefits of pursuing sound policies in a particular area are
therefore not confined to that area, but extend to other policy areas as
well. Triggering a virtuous cycle of sound monetary, fiscal and
financial policies therefore seems like the surest and fastest way to
resolve the conundrum the euro area faces right now.
The euro area still has a long way to go, especially with regard to
fiscal policy. Unfortunately, the spill-over from monetary policy -
savings through lower interest expenses - has not been used as much as
it could to press ahead with improving public budgets.
4. Conclusion
Ladies and gentlemen
Macroeconomic stability is multidimensional, and this is essentially
what this year's Spring Conference seeks to capture. While sound
policies have to be pursued in each area to safeguard overall economic
stability, the benefits of pursuing a sound policy spill over to other
areas as well.
A virtuous circle of sound monetary, financial and fiscal policies is
without doubt an enticing prospect, not only for the euro area, and I
am confident this conference can enrich our understanding of how to make
it happen.
I wish us all an exciting conference.
