some cases defying the taboo of buying government debt in the primary market. such effective uses, however, might have been attributed to a common global shock. abundant global liquidity and the fact that advanced economies themselves were breaking taboos on a much larger scale might have helped emerging economies avoid being penalized by international capital markets for ultra - loose expansionary policies. it is therefore questionable whether the same results would be obtained if emerging markets alone were to face the risk of falling into secular stagnation and if they were to implement similar expansionary fiscal and monetary policies in response. constraints on ucmps in emes a more difficult question is whether emerging economies should use unconventional policies when facing secular stagnation, when global liquidity is not sufficient. the chance of returning to very low inflation and low growth is significant for korea and other asian emerging economies, such as thailand and china, considering their rapid aging and earlier experiences of low inflation. even so, unconventional forward guidance may not be a desirable toolkit for emerging markets with greater uncertainty, exacerbating the inflexibility of unconventional forward guidance to sudden economic changes and the exit problem. in addition, there are several structural factors to consider. for unconventional forward guidance to be successful, the central bank must be able to commit to the announced strategy and make a credible case that it is consistent with achieving the central bank ’ s objectives. otherwise, the central bank could be subject to aggressive speculative attacks. for example, unconventional policies trying to lower interest rates could lead to excessive depreciation of the local currency if the market perceives the policy as being inconsistent with the macroeconomic fundamentals of the country. concerns about fiscal dominance is another example. the experience of japan since the 1990s well - illustrates that the main driver of public debt explosion has been agingrelated spending, not fiscal spending to boost the economy as is commonly believed. this shows that it is not easy for emerging economies that are experiencing rapid aging, to credibly convince markets of a scenario that temporarily requires a large fiscal stimulus while promising to maintain fiscal sustainability in the long - term. an alternative conventional forward guidance so, if unconventional forward guidance is not desirable, then what are the alternatives? one option could be scenarios - based conventional forward guidance. for example, in summer last year, this framework could have been used to present different scenarios for the two clear narratives regarding inflation : persistent vs transitory. the first scenario would have assumed inflation was more persistent, requiring faster policy normalization

to put more emphasis on lending performance to small and medium enterprises. iv - concluding remarks the korean economy is now placed in an extremely difficult situation, where previous experience and received wisdom provide little guidance. however, all economic actors fully realize that in order to tackle the problems which led to the crisis, there is no alternative other than swift and intensive structural adjustment. and we are now resolutely and patiently fitting the blocks carefully together to build a sound new economy. the bank of korea will do its utmost to support this structural adjustment, while maintaining monetary stability. of course, to some foreigners, korea ’ s structural adjustment may appear inadequate or incomplete in some aspects. but may i ask you as informed commentators on the korean economy to have confidence in our resolute determination to carry out thoroughgoing structural adjustment. your counsel and advice in this process will be greatly appreciated.