36  All speeches are available online at www.bankofengland.co.uk/speeches  36  (c) Models of Financial Stability: In a world of monetary, macroprudential and microprudential policy, all having an impact on the economy and on the financial system, there is an increased onus on developing quantitative frameworks which enable us to understand their impact, individually and collectively, and their interaction (Bank of England (2015b)). That calls for models able to capture quantitatively monetary, financial and regulatory channels of transmission and the feedback mechanisms between them. Progress has been made, in particular since the crisis, in developing macro-models with an explicit financial sector which can capture rich, two-way feedbacks between the economy and financial system (for example, Brunnermeier et al (2012), Brunnermeier and Sannikov (2014)). There has been progress, too, in developing models of systemic risk which assign macroeconomic factors, and within-system feedbacks, a prominent role (Greenwood et al (2014), Cont and Schaanning (2017)). Yet we are still probably in the foothills when developing a unified framework for bringing these factors together in one place, a framework that could capture the rich feedback and amplification mechanisms that operate in practice and a model which could then serve as a test-bed for each of the three arms of policy. Indeed, it could be that a single, Holy Grail, framework is infeasible or indeed undesirable. (d) Future of Stress-Testing: Bank stress testing has evolved considerably since the financial crisis and is now a cornerstone of the regulatory regime in many jurisdictions.

Such an environment will also make the process of adjustment and economic transformation easier. In this respect, I believe that we have the right monetary framework to best 2  BIS central bankers’ speeches  achieve this. The BOT’s inflation targeting framework has served us very well since its adoption over 10 years ago. Apart from serving as an anchor for macroeconomic stability, the BOT can also undertake steps, or act as a catalyst for the necessary changes, that will serve to enhance Thailand’s competitiveness and augment economic adaptability. Most directly, the BOT can strive to enhance the effectiveness of the financial sector in serving as intermediaries of capital. Our current strategy is to broadly deliver tangible improvements in four key dimensions. First, encourage financial innovation and the expansion of available financial instruments. Second, broaden the choice available to firms and households in terms of financial services. Third, reduce the cost of these financial services. And finally, improve access to them. To this end, the BOT has embarked on a multi-pronged approach that involves a number of strategic plans. Chief and foremost is the second Financial Master Plan. This plan, which takes into account major global developments such as regional integration and global regulatory reform, will further this vision of a modern and inclusive financial sector landscape. At the same time, we are pursuing ways to improve financial system infrastructure, including through upgrades to the payment systems to promote more efficient settlement of private sector transactions.