traditional monetary policy which focuses on domestic dynamics of inflation needs to be reconsidered. as a result of globalization, the prices of important commodities and goods tend to move together, making external price shocks a more and more important determinant of domestic inflation. fluctuations in oil prices and other commodity prices, or even a sustained period of cheaper or dearer exports, can change global inflation dynamics. the spike in oil and commodity prices last year, which initially appeared as a supply shock at the individual country level, in fact represented economic overheating at the global scale, and domestic monetary policy tightening may not have been the most effective way to deal with this situation in the global context. in addition, at the present juncture, the unprecedented and contagious slowdown in each country ’ s economies as a result of global linkages means that monetary policy now needs to respond to the monetary policy stance in other countries. this has added an extra international dimension to policy making, in addition to previous considerations such as the impact via capital flows and trading partners ’ economies. 4. testing the limits of monetary policy under globalization but what exactly are these changes that globalization has brought about to traditional monetary policy? and in particular, how have these changes affected central banks? the first aspect has been the challenge to the basis of our traditional monetary policy decision - making process. traditional conduct of monetary policy would rely on the accuracy of our forecasts of the economy, of inflation dynamics, and of our understanding of how the economy works. with globalization, making accurate economic forecasts become more difficult. the recent economic cycle has demonstrated that shocks to the economy and the price level have been both rapid and frequent. this is most clearly demonstrated by the volatility in inflation in the past year. in the case of thailand, headline inflation peaked at 9. 2 % in july last year, but has fallen dramatically to - 0. 4 % in january. while it is natural for forecasts to be revised in light of new developments and information, a concern arises that globalization is likely to have changed the various relationships in the economy. this is particularly timely now, when fear and uncertainty takes over rational behaviour. and if our models are still based on assumptions which have not incorporated these changing relationships, then we are likely to make systematic errors in our forecasts. as a result of this volatility in inflation and the marked slowdown in global output, many central banks have had to reverse their tightening cycles – originally conducted to tackle

while dealing with short - term issues, we need to pay attention to long - term challenges that could restrain our competitiveness, productivity, and growth potential. the rising trend of disruptive technology will also come into play as it brings both opportunities and threats. to tackle these long - term challenges, structural reforms are underway to upgrade and unlock our economic potential in the long term. the government has made structural reform a national agenda and has launched several important initiatives. one of our main focuses is to upgrade connectivity infrastructure within thailand and within the region, including roadways, railways, waterways, power lines, air networks, and digital networks. this strategy will establish thailand as a center for regional transportation and logistics, connecting the indian ocean with the pacific ocean, as well as connecting thailand with south china and neighboring clmv countries. beyond building physical infrastructure, the government is pushing forward to restructure the thai economy towards a high - value and innovation - driven economy under the ‘ thailand 4. 0 ’ theme. this policy focuses on promoting targeted industries, including the ‘ new s - curve ’ industries. as many of you are well aware, the board of investment ( boi ) revised the criteria for investment promotion privileges to be based on the value added content of the project rather than on its location as in the past. thailand ’ s economic model will be geared towards sophisticated high - valued manufacturing, innovative manufacturing, and modern services. this can be done by focusing on promoting technology, creativity, research and innovation, especially with respect to it - based services. in addition, the government is undergoing an overhaul of the legal frameworks, which need to catch up with the fast changing world, and new business practices. in my view, legal reform is the area that has not been well appreciated or perhaps well communicated to the foreign investor community. let me take this opportunity to inform you of some significant legal amendments. in so doing, i would like to briefly categorize the ongoing legal reform into three broad groups. the first group is to improve governance and distribution of economic opportunity. for instance, the amended securities and exchange act will boost governance and fairer trading environment in the thai capital market with more effective enforcement mechanism to punish market misconduct as well as broader coverage of wrongdoings to prevent malpractices. the new bill on the governance of state - owned enterprises, or soes in short, aims to tackle the governance within the soes system, as government agencies involved with soes often assume multiple