central bankers ’ speeches sixth, learning machines. this might well be the most impactful technological change of the future – computers that can think. • traditional computing machines and algorithms are programmed to carry out specific tasks in response to defined circumstances according to the software programme that is written into them. • we are now moving into the age of cognitive machines which are designed to learn from the data that they hold and be able to, in a sense, programme themselves to perform new tasks. • they continuously adapt to new data as well as feedback and inputs gathered from their experiences, including interactions with humans. we are already beginning to see examples in the financial industry : • in equity, commodity, and fx markets, some traders are using self - learning algorithms – • they not only analyse historical data, predict price movements and make trading decisions, but continually upgrade and adjust their trading strategies in the light of new evidence and market reactions. in lending, learning machines have been used to construct models for consumer credit risk and improve the prediction of loan defaults. the legal minds assembled here might want to reflect on where the legal liabilities arising from the actions – or inactions - of such learning machines lie. the six technologies that i have outlined have the potential to transform the financial industry globally. there could well be others that i have not mentioned. the important thing for our fis is to be alert to these and other technology trends, understand their possible implications, and seize the opportunity to apply relevant technologies safely and efficiently - to boost productivity, gain competitive advantage, and serve consumers better. smart nation needs a smart financial centre at the national level, singapore has set its sights on becoming a smart nation – one that embraces innovation and harnesses info - comm technology to increase productivity and improve the welfare of singaporeans. the smart nation programme under the prime minister ’ s office has brought together stakeholders from the government and the industry to identify issues and develop solutions with this objective in mind. government agencies have been rolling out a steady pipeline of smart nation initiatives. • the housing development board has trialled a new system that utilises home sensors to monitor elderly folks who are staying alone and alert caregivers should an emergency arise. • the land transport authority is studying the use of autonomous vehicles that can self - drive with the help of environmental sensors and navigation systems. • the urban redevelopment authority has been utilising geospatial information and data analytics for urban design and land - use planning. a smart nation needs

testing hypotheses or investigating the effects of a previous policy change, for example. different users will have different tastes, beliefs and needs and will prefer certain types of models. ” i understand a number of central banks, including the bank of england, have followed this path. i am sure that you will hear more of this later from the expert from the boe himself. such an approach is of course hugely taxing on resources and here in asia, we could perhaps look upon it as a desirable goal to strive for. finally, i also encourage a pragmatic approach. here, i am referring to the practice of supplementing model output with sectoral analyses, survey data, market trends as well as value judgements. modellers need to be aware of the limitations of their models. the complexities of the economy cannot be fully captured by a macroeconometric model, no matter how comprehensive its specifications. in particular, macro models cannot quantify variables such as panic, greed or the herd psychology of investors. as a result, even the predictions of the most sophisticated model have been thrown off by unexpected developments in the environment. this was clearly evidenced during the turmoil in international financial markets in august 1998, when the ltcm crisis unfolded. conclusion the new monetary model of singapore incorporates many of the new features and innovations in macro modelling. in time to come, i hope that it will be further fine - tuned so as to reflect the five qualities that i have just spoken about. in this process, it might be useful to modellers in singapore and even from the region to meet more regularly to exchange ideas and learn from each other ’ s experiences. in the post - asian crisis era, one of the main concerns of regional policymakers is that of monitoring vulnerabilities of the domestic economies to external shocks. there is a need for a formal and reliable monitoring mechanism to help supplement overall surveillance efforts. perhaps macro models could be employed to this end. if workable, this might just be the function that renders models not only relevant but actually indispensable to policymakers. i leave you with this thought and wish you all a day of fruitful deliberations. “ empirical modelling in economics : specification and evaluation ”, the 1998 marshall lectures.