##able and will continue to be the case that the federal reserve will focus on its own mandate in setting policy. but as the us dollar is used heavily abroad, the effective us dollar currency area extends well beyond us bis central bankers ’ speeches borders. the federal reserve sets policy for this wider currency area, not just the 50 us states. there have been a lot of discussions about how policy cooperation and coordination may offer scope for improvement. but a practical solution still seems elusive. ladies and gentlemen, in closing, let me offer my special thanks to the distinguished speakers for taking part in this important endeavor and for sharing with us your expertise. all of us here very much look forward to your contributions throughout today and tomorrow. i would also like to thank the imf – in particular, the regional office for asia and the pacific – for kindly co - hosting this event. to all conference participants, i welcome your spirited discussions as i have already noticed there are many experts present among us. thank you for being here. i wish you a fruitful conference and a pleasant stay in thailand. bis central bankers ’ speeches

prasarn trairatvorakul : monetary policy in an interconnected global economy opening remarks by dr prasarn trairatvorakul, governor of the bank of thailand, at a conference co - hosted by the bank of thailand and the international monetary fund, bangkok, 1 november 2013. * * * distinguished participants, ladies and gentlemen, i am delighted to welcome you to this conference on “ monetary policy in an interconnected global economy, ” co - hosted by the bank of thailand and the international monetary fund. i would like to especially thank our international guests who have travelled a long way to be with us today. this conference will focus on several issues pertaining to cross - country linkages, international shock transmission, and how monetary policy should be conducted in response to global spillovers. one of the most important trends over the past decades is the rapid integration of international trade and finance. trade in goods and services, as a share of world gdp, increased from around 15 percent in the early 1980s to around 25 percent before the start of the crisis in 2007. these developments reflect, in part, the increasing internationalization of production through vertical trade linkages. we have also seen a significant increase in financial integration. while the annual growth in world trade over the past 40 years has exceeded the growth in world gdp by around 2. 6 percent on average, growth in international external positions outpaced growth in world gdp by almost double that – around 4. 8 percent. what are the implications of these tighter trade and financial linkages? most prominently, global interconnectedness implies large and swift transmission of shocks across countries. a seemingly localized supply shock, such as the tsunami in japan or the floods in thailand two years ago, created ripple effects in various parts of the world by disrupting the global supply chain of production. from the perspective of most asian economies, the abrupt economic contraction in the us and the euro area during the financial crisis were examples of external demand shocks. while such “ real spillovers ” generated by supply or demand shocks can be quite damaging, the avenues for dealing with them are apparent and relatively uncontroversial. fiscal automatic stabilizers should be allowed to work fully and monetary policy could be eased to cushion the impact so long as medium - term inflation expectations are contained. calibrating the policy response to these shocks may not be straightforward, but they do not, in of themselves, pose challenges to the underlying framework of policy. on the contrary, “ financial