forward, the consumption and investment sentiments of economic agents may contract further. against this backdrop, in order to help restore our economy ’ s vitality it is important, along with our implementation of accommodative monetary and fiscal policies, that we carry out structural reforms consistently. in the absence of structural reform our macroeconomic policy will not generate the desired effects, and we will only find our policy space being exhausted. we should also devote great efforts to discovering and nurturing new growth engines, which can drive our economy going forward. we need to create new industries and new markets, by investing actively in and fostering digital innovation, the so - called “ 4th industrial revolution ”, which is progressing rapidly especially in some advanced countries. together with this, we should also work to expand employment. in the past, it was understood that the role of employment was limited to supporting the demand for labor following economic growth. however, as discussed during last month ’ s bank of korea international conference on employment and growth, attention is now focusing on the role of employment in leading growth. dear fellow members of the bank of korea, bis central bankers ’ speeches i would like to touch now on the tasks that we will need to focus on from the latter half of this year. moving forward we must maintain our accommodative monetary policy stance, with a focus on revival of the domestic economy. this will also work to lessen the negative short - term impacts of corporate restructuring on production, employment and the sentiments of economic agents. second, given the long period of monetary easing undertaken to this time, we will need to pay even more attention to financial stability. it is essential to keep a closer eye on developments related to household debt, which has been maintaining a trend of high growth recently, and to carry out macroprudential policies as necessary in a timely manner in consultation with the government and the supervisory authorities. with the prolongation of our low interest rate stance, economic agents ’ risk appetites are likely to grow, and imbalances in the financial system in consequence likely to build up. we should therefore devote more attention to these imbalances. we should also not spare efforts in examining the potential risks that can cause expansions in financial market volatility at home and abroad, such as the uncertainties surrounding the us fed ’ s monetary policy normalization process, and the potential for a resurfacing of financial and economic unrest in china. if a credit crunch or any other

the financial stability board and, in the case of the european union, the activation of the banking union, beginning with the ssm and the single resolution mechanism. the new monetary policy i shall now turn to the challenges central banks face. the first is, evidently, identifying what is understood by the “ new normal ”. one question on which economic policy discussions are focusing is whether the advanced economies are in a new situation of secular stagnation, a “ new normal ” characterised by low growth, low inflation and low interest rates. we are seeing how, despite lower unemployment rates and the closing of the gap between potential and real output, inflation rates remain persistently low. a series of factors can account for this behaviour. some are transitory, such as the insufficient increase in employment, or the impact of deleveraging processes in some economies. but there are 4 / 7 also factors of a more structural nature, including the effect of globalisation and technological progress, or demographic factors. in any event, it should be stressed that there are other policies apart from monetary policy. in particular, both fiscal policy and structural reforms have a key role to play in supporting demand, boosting real interest rates and raising productivity and potential growth. regarding monetary policy, the central question is this : to what extent should the macroeconomy of the “ new normal ” lead to a new “ conventional model ” for monetary policy? in particular, it is considered whether the management of the central bank ’ s balance sheet will become entrenched as a permanent part of the normal instruments of monetary policy. estimates, while subject to major uncertainty, suggest that real interest rates and inflation will remain at low levels, meaning that nominal rates will also be low, thereby limiting their effectiveness as a monetary policy instrument. against this background, central banks are likely to retain the use of unconventional monetary policies. analysis of these policies is leading to debate, as yet inconclusive, on their effectiveness, the optimal size of central bank balance sheets and on the impact that they might have in terms of financial stability and the medium - and long - term fiscal situation. true, as the recovery gains momentum, and provided this translates into a sustained adjustment by inflation towards its target, the need for monetary policy to support the economy will tend to diminish. the us federal reserve has already begun to reduce its balance sheet at a gradual and predictable pace, and the ecb has slowed the pace of increase of its own balance sheet. this reduction