s role as its national economy ’ s lender of last resort is indispensable. in light of this, the bank of korea is moving to cooperate actively in the systems of international policy coordination, by strengthening our networks with other central banks. domestically, we find ourselves in a situation in which inflationary pressures have become very large, driven by global inflationary trends due to the excessive global liquidity and rapid growth in emerging economies, and by the continued growth of our domestic economy. it is high time now for us to seek ways of establishing a post - crisis paradigm so as to firmly anchor the foundation for price stability in the medium - and long - term, based upon thorough analysis of the currents of economic change both at home and abroad. bis central bankers ’ speeches going forward, we must be unremitting in our efforts to restore the robustness of the korean economy, so that it is not so greatly swayed by domestic or external shocks. i am firmly convinced that all amcham members gathered here today will also contribute much, in your own individual fields of expertise, as our partners for the stable growth of the korean economy. i should like to close by again expressing my gratitude to amcham for giving me this opportunity to address you. bis central bankers ’ speeches

to build up the pressure that results in crises and large disruptive adjustments. there is another reason why the performance of the australian economy has become more stable than formerly which is not the result of deliberate policy decisions. i refer to the changed behaviour of our terms of trade, a subject i have spoken of on many previous occasions. the terms of trade is the ratio of the price of our exports to the price of our imports, that is the “ buying power ” of our exports. for much of the 20th century our terms of trade trended downwards because the prices of commodities, which make up much of our exports, failed to keep up with the prices of manufactures, which make up most of our imports. in my view, this trend started to change about 15 years ago, as new sources of low - cost manufactures started to come on stream from asia, particularly from china. now it is manufactures prices that act like “ commodity ” prices, and not just in a trend sense, but cyclically too. you will note from my next graph that in the recent major - country recession of 2001, our terms of trade actually improved. normally, we would have expected them to fall, which would have magnified the contractionary effect of the global slowdown. the second question is why has the australian economy recently shown much more stable behaviour than the much larger and more diversified us economy? this is not what you would normally expect of the two economies on the basis of their size or their history. i think the major reason for this is that the us had an asset price boom and bust - commonly known as a bubble - and we did not. i have already shown the rise then fall in equity prices, profits and business investment in the us and the effect this has had on economic activity. the us economy is suffering from a hangover after the binge ; we did not have the binge and so have avoided the hangover. i would like to say that it was excellent economic policy that prevented us from participating in the binge, but that would be claiming too much. noone really understands the relationship between macro - economic policy and asset price booms and busts well enough to make that claim. the unfortunate fact is that it seems to be possible to experience an asset price boom in an economy where macro - economic policy settings seem to be relatively well disciplined and inflation quite restrained. one thing we do know, however, both from the us experience and the earlier japanese experience, is that once the