Although some similarities do exist between the two, the differences nevertheless outweigh them, and I will be coming back to these later. I will also be looking ahead and briefly discussing the driving forces behind price developments in the property market. Developments in the housing market In principle, there are two different methods to explain rapid price changes. The first approach is based on the fundamental driving forces that govern prices, and explains price changes through changes in these variables. Such fundamental factors include interest rate levels, household income and the production of new homes. The second approach assumes instead that prices are not governed by these fundamental driving forces, but rather are based on expectations of future price rises. Such a situation is usually referred to as a “bubble”. A recent example of this is the surge in prices seen in IT shares during the latter part of the 1990s. The rate of increase observed then proved gradually to be unrelated to fundamental driving forces but rather to unrealistic expectations of a trend that never materialised. When this eventually became evident, prices plummeted. So the price rises seen during a bubble do not mirror fundamental factors but simply reflect expectations of future price increases. Investors become involved in a process of speculation where  BIS Review 38/2003  1  estimates of future cash flow are no longer of importance and price rises are instead assumed to be the trend.

Monetary policy must be conducted with caution as to not contribute to further build-up of financial vulnerabilities. Furthermore, amidst the prolonged period of low interest rate and the increasing search-for-yield behaviors, it is our view that supervisory coordination is increasingly imperative for effective risk monitoring to make sure that the regulations across different regulators are broadly aligned and that financial 4  activities cannot simply move from a regulated to an unregulated umbrella. This is reflected through our close collaborations with other regulatory bodies such as the Securities and Exchange Commission (SEC) and the Office of Insurance Commission (OIC). Ladies and gentlemen, While we have adequate external buffers to withstand short-term vulnerability in the global market, what would ensure the economy’s stability and resilience in the longer-run are productivity-enhancing infrastructures and ecosystem. This is crucial for the country’s competitiveness in the years to come. I am delighted to say that we are on the path of productivity improvement. With the limited time I have, it is difficult to do justice to all the projects that have been initiated. Some of the most notable examples are the Eastern Economic Corridor (EEC) and transportation and digital infrastructure projects that have been long-overdue. On our side, the Bank of Thailand is doing its part to develop infrastructure and ecosystem needed for the ongoing transition towards the digital economy. Under the e-Payment Masterplan, we, together with the Ministry of Finance and the Thai Bankers’ Association, launched PromptPay, which has allowed real-time fund transfers among individuals and businesses.