the development throughout malaysia. the emergence of new growth areas in malaysia such as renewable energy ( e. g. solar ) and semiconductors in fast - growing segments such as automotive, medical devices and telecommunications, has enabled malaysia to be plugged into the global supply chain. investment in the manufacturing sector has moved towards higher value - added activities, shifting from basic production and assembly to producing goods which have advance applications such as in the automotive and healthcare sectors. as a country which is strategically located within close radius of two of the most populous economies in the world, china and india, malaysia is centrally located in asia, more broadly, and in asean, in particular. with the conception of the asean economic community ( aec ), companies would benefit from the stronger economic inter linkages through greater cross bis central bankers ’ speeches border liberalisation and increased intra - asean trade. firms in this region will gain greater market access to 630 million people that are generating economic region that is worth usd2. 4 trillion. the increasing importance of asia in the global economy has raised international interest to better understand asia – the economies, businesses and the people that comprise the region. on that note, i would like to mention that bank negara malaysia has entered into a collaboration agreement with the massachusetts institute of technology sloan school of management ( mit sloan ) to establish the asia school of business ( asb ) in kuala lumpur. asb is envisioned to be a premier business school that develops transformative and principled leaders that will contribute to a better future and the advancement of the emerging world. conclusion let me conclude my remarks. we are now experiencing a phase of modest growth in the global economy, in an environment that is characterised by heightened uncertainty and volatile financial markets. the malaysian economy has withstood these challenging times, supported by our strong initial conditions and early and comprehensive policy responses. the intrinsic strength of the economy, reinforced with policies to encourage greater investments that would serve to ensure greater economic sustainability for the future. finally, active regionalisation is an important strategy for asia to enhance regional economic prosperity. malaysia actively participates in the efforts to strengthen linkages within the asean community and to creating opportunities to foster greater economic integration. these efforts will place asean on a path to realising its economic potential and enable the region to collectively prosper. bis central bankers ’ speeches

prices. 6 however, relative to balance sheet policies, the influence of the short - term rate is far better understood and extensively tested : there have been several decades and many business cycles over which to measure and analyze how the federal funds rate affects financial markets and real activity. in contrast, experience using the balance sheet as an active tool has been very limited and largely confined to a highly unusual period around the global financial crisis, when short - term interest rates were constrained by the zero lower bound. predictability, parsimony, precision, and clarity of communications all would seem to argue in favor of focusing policy on a single active tool that is most familiar. in short, it makes sense to focus policy on the tool whose effects are better understood by both policymakers and the public in circumstances where the tools are largely substitutes for one another. 4 / 6 bis central bankers'speeches even with this subordination strategy, however, there may be limited circumstances in which the balance sheet might be employed in a manner that is supportive of the short - term rate. most obviously, during the period when the balance sheet is running down, if the economy encounters adverse shocks, it may be appropriate to commence the reinvestment of principal payments again in order to preserve conventional policy space if the federal funds rate were to drop below some threshold level, perhaps similar to the “ well under way ” threshold. more broadly, although the two tools can achieve roughly similar effects, they are different, and we cannot rule out that there may be special circumstances in which these differences may be particularly valuable. in particular, these differences may be an important consideration in circumstances when the transmission of changes in the short - term rate to long - term rates and other financial market variables and the real economy is impeded. in addition to directly affecting longer - term interest rates, changes to the balance sheet could serve to reinforce policy communication associated with the short - term rate. some observers believe that such signaling was an important contributor to the effect of the balance sheet on the economy during and after the global financial crisis. 7 thus, the subordination strategy will likely be appropriate in most circumstances, but we cannot completely rule out special circumstances in which the complementary use of both tools may prove compelling. assuming that a subordination strategy is adopted, and the balance sheet is set to shrink passively and predictably once reinvestment ceases or is phased out, there is some uncertainty around the size of the balance sheet when it returns to normal,