the crisis, but also because of the policy choice that was made long time ago to increase flexibility. let me now turn to the second part of my talk on the post - crisis environment and the challenges for emerging markets. the challenges for emerging markets in the post - crisis world will be shaped importantly by the forces of change that will emanate in the new global economic and financial environment. some of these forces will relate to cyclical shifts in trade and financial flows in response to new configuration of risk and opportunities that arises. others will represent a more fundamental change as the new structure of economic and financial relations between countries emerges to replace the old structure that had been dismantled by the crisis. recent discussion on this issue has pointed to the new normal global growth, the rise of asia, and the increased role of government in the economic system as the new economic realities in the post - crisis world. but amongst these three possible new changes, i think the most important that will have far - reaching implications for emerging economies will be the durability and the composition of global growth. the new normality of global growth will see a lower average rate of growth, weighed down by slower growth in the advanced economies because of the balance sheet problems of households, banks, and the government. emerging markets, on the other hand, will see a more rapid recovery and expansion, leading to what has now been described as a two - speed global economy. implications of this two - speed economy for emerging markets will be twofold. first, differential growth outlook will provide incentives for a reallocation of investment into emerging market assets as investors look for higher return. this will result in large and persistent capital flows to emerging markets with important implications for the exchange rate, domestic liquidity, inflation, and asset prices. second, the two - speed economy will represent a shift in the centre of economic gravity from the advanced countries to the asian region. but whether such shift is sustainable will depend crucially on how the transition is managed by policies in emerging markets. chief amongst these are the exchange rate arrangement and the policy to reorient the growth driver from exports to domestic demand. successful handling of these two issues will significantly reduce the risk and the threat to financial stability in emerging economies associated with strong and persistent capital flows. therefore, managing this risk and growing safely in this era of new globalization will be the stake for emerging economies going forward. let me now turn to the third and final part of my talk which is on the challenge for

central banks. the task set ahead for central banks in emerging markets, therefore, are many. first and foremost is to manage the challenge posed by the new globalization in the pursuit of price stability. important in this context is the monetary policy framework that addresses the challenge to price stability while at the same time allows central banks to pay closer attention to financial stability. next is the question on the role that central bank policies can play to support the economy ’ s transition from export - led growth to a more balanced growth. such transition will require a redirection of economic incentives from exports to domestic consumption and investment. at a minimum, the transition will require a further strengthening of the economy ’ s financial system so as to ensure an efficient intermediation of resources into productive investments. against this backdrop, i want to leave you with a few thoughts on the challenges to macroeconomic policy that will be important for emerging market central banks going forward. the first is monetary policy and the challenge is to have in place a monetary policy framework that can deal effectively with the threat to price stability and the need to oversee the risk of financial imbalance in this era of globalization. in the current crisis, it is clear that no particular monetary policy framework is superior in dealing with such a challenge. nonetheless, experience of many inflation - targeting emerging economies in this crisis does demonstrate that price stability and financial stability can be preserved even in extreme financial circumstances under a flexible inflation - targeting regime. this is because, under inflation - targeting, monetary policy can be flexibly combined with macroprudential measures to address concerns on financial stability without undermining the credibility of monetary policy. the bank of thailand has pursued this line of flexibility since 2004. moreover, inflation - targeting also offers flexibility in the setting of the inflation targets in terms of the choice between core and headline inflation, as well as the level of the inflation targets itself. this flexibility means that monetary policy will have greater room to maneuver in responding to shocks. with this flexibility, my view is that inflation - targeting remains useful as a framework for monetary policy in emerging economies. the second challenge is how to manage the macro - implications of large and persistent capital inflows, especially the risk to financial stability, in the context of a small open emerging economy. at this time, this challenge is real for most countries in the region and the challenge is more demanding compared to the similar episodes in the 1990 ’ s. this is because this time capital flows are not linked to the financing of