the impact is already being felt in the slowdown of our exports and growth. second, major central banks have indicated intentions, or a few have taken steps, to relax their monetary policy to support growth in an environment of low inflation. while this has helped to loosen the global financial conditions, the question is should emerging economies be prepared for another round of surge in capital inflows? this brings me to my third point. for emerging economies, capital flow volatility is a fact of life and something that policy makers have to deal with ; and we have to acknowledge that the size and volatility of capital flows will only intensify. while the transmission of global shocks to the domestic economy through the real economy channel – that is through trade and investment – is something that we have been dealing with for decades, policy makers today are confronted with the increasingly dominant channel of 1 / 3 bis central bankers'speeches transmission of shocks through the financial markets, at least in the immediate term. all of us have experienced how spillovers from external developments that were manifested through capital flow volatility have adversely affected domestic financial markets, asset prices, liquidity conditions and importantly, exchange rates. all these challenges make for a complicated policy environment for asean central banks. gone are the days when keeping our own house in order is enough. sure, good fundamentals matter as they have no substitute. they are, however, no longer sufficient. as keynes rightly pointed out a long time ago, “ the market can stay irrational longer than you can remain solvent. ” often, we have seen how external developments that are beyond our control, such as the unprecedented quantitative easing by the advanced economies and the subsequent taper tantrum, triggered periods of large inflows followed by sharp reversals in emerging economies with severe consequences. for small open economies, these flows can easily overwhelm the domestic financial markets and lead to build - up of vulnerabilities in the economy. facing this new reality, the policy reaction function of central banks from the emerging market economies could, to quote bis general manager carstens, be described as a multi - instrument reaction function responding to multiple - indicator variables, including the exchange rate. given these increasingly complex and interconnected challenges and the risks of policy tradeoffs, what should guide policymakers going forward? allow me to pose three questions on this. question 1 : the assignment problem first, the assignment problem – how do we assign policy tools to policy targets appropriately? the tin

marzunisham omar : comprehensive approaches to monetary and financial policy making in asean - 5 countries welcome remarks by mr marzunisham omar, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the third bnm - imf seminar, kuala lumpur, 17 july 2019. * * * in his remarks at this seminar last year, odd per quoted the book enchanted ; “ first time is luck, second time is a coincidence and third time is a tradition. ” here we are gathered today for the third bnm - imf seminar to celebrate this “ tradition ”, a tradition i hope will continue for many years as we can all agree that candid and open dialogue between the imf and asean - 5 central banks is mutually beneficial. let me take this opportunity to thank the imf and the team at bank negara malaysia for organising this seminar and to my colleagues from the region for being highly supportive of this effort. the topic today – “ comprehensive approaches to monetary and financial policy making in asean - 5 countries ” – is indeed timely given the ongoing work at the imf on the “ integrated policy framework ”. i hope today ’ s seminar will help shed greater insights on how central banks in asean economies, which are small, open economies, navigate through increasingly complex, interrelated issues in our pursuit of preserving monetary and financial stability. i have no doubt that we in asean will also find today ’ s seminar useful in understanding the imf ’ s latest thinking on these issues. there are two parts to my brief remarks today. first, i will touch on the increasingly complex policy making environment given the openness of our economies. second, i will posit three issues that we need to grapple with in considering the optimal policy mix towards achieving monetary and financial stability. our mandates are to preserve monetary and financial stability, which are critical conditions for sustainable growth. in the pursuit of these mandates, a key consideration is the openness of our economies. while the integration of our economies with the global economy and international financial markets has yielded substantial benefits, it has also made our economies more susceptible to external shocks and spillover effects from global developments. let me briefly touch on some of these external factors : first, global growth momentum is slowing. a key issue is how deep and prolonged the slowdown will be. a key risk is the ongoing trade tension and its impact on global trade, investment and sentiments. for many of our countries that depend heavily on international trade,