In the simplest New Keynesian model, these are, first, the “IS” curve, which traces a negative relation between output and the (ex-ante) real interest rate (𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 ): 1 𝑦𝑡 = 𝐸𝑡 𝑦𝑡+1 − (𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 ) 𝜎 This equation comes from the optimisation problem of households who choose consumption to maximise their lifetime utility. 𝐸𝑡 denotes the mathematical expectations operator. The term in expected output, 𝐸𝑡 𝑦𝑡+1 , appears on account of households’ desire to smooth consumption. The real interest rate enters this condition because ultimately households care about their real consumption levels and it is the real interest rate that is relevant for transferring these consumption levels, via saving, across time. The parameter 𝜎, the intertemporal elasticity of substitution, controls the size of this effect. 31  In the simplest monetary models, the natural level of output (or “trend output”, if you like), is exogenous (e.g. is determined by TFP alone).
Muhammad bin Ibrahim: Financial sector talent enrichment programme – syllabus enhancement Keynote address by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia, at the launch of the “Financial Sector Talent Enrichment Programme (FSTEP) – Syllabus Enhancement”, Kuala Lumpur, 20 July 2010. *  *  *  I am delighted to be here this morning to officiate the launching of the Financial Sector Talent Enrichment Programme – Syllabus Enhancement which will be implemented for the next 5 batches until batch 10. Today marks a milestone for FSTEP as the programme has delivered more than 680 graduates to the industry and is now poised to deliver another 500 graduates under an enhanced syllabus. The development of human capital in the financial services industry is core in promoting a well-functioning and stable financial sector. Human capital development is critical in nation building as a whole. At Bank Negara Malaysia, for many years, we have embarked on strategies to strengthen human capital development in the financial services sector. Various institutional platforms were established such as INCEIF, the International Centre for Education in Islamic Finance; ICLIF, the International Centre for Leadership in Finance; AIF, the Asian Institute of Finance; and of course, FSTEP, which is entrusted with equipping talents with the right skills and knowledge for their smooth transition into the financial services industry in Malaysia. It is such initiatives that would put the necessary foundation to promote Malaysia as a centre of learning for financial services this region.