##ze firms are in a much more difficult position than large firms that have deeper pockets and larger buffers. trade tension might be comparatively short - lived when compared to other structural changes like demographic shift and technological disruptions, but these short - term factors could result in a long - term impact to medium - size firms and the structure of the economy through channels such as changes in competition landscape, market dominance power, and investment and employment patterns. of course, the big question now is what roles could policymakers play to support this transition. i see smes capacity building as one key area where the government needs to be actively involved. this includes proactive consultation and coaching, providing incentives for productivity - enhancing investments, prohibiting abuse of market dominance power by large firms, promoting digital adoption, as well as eliminating outdated laws and regulations hindering sme ’ s competitiveness. although enhancing sme competitiveness might not be a direct mandate of a central bank, the bank of thailand has stepped up our policy focus on smes and worked with the banks on a number of initiatives. new digital payment platforms have been developed to lower costs of payment services, enhance payment efficiency, and provide a foundation for information - based lending and supply chain financing. a new database on system - wide sme loans by contract was set up to improve understanding of sme financing behavior and analysis of sme credit risks. we have also expanded the range of foreign exchange hedging products for smes and, recently, taken steps to encourage preemptive rescheduling and restructuring of sme loans to help facilitate their transition during this challenging period. dealing with financial spillovers the second issue for emerging nations in this new global environment is the size and volatility of financial spillovers that result from unconventional monetary policy after the gfc. capital flows, especially portfolio flows, now account for a much larger portion of crossborder flows than current account flows, and have a much larger effect on the exchange rates for ems. these capital flows — a significant portion of which are non - resident activities — are more sensitive to global financial conditions which have been dictated largely by monetary policy stance of aes and global investors ’ sentiment rather than textbook - determinants like macroeconomic conditions in ems and interest rate differentials. moreover, due to the large foreign - exchange activities by non - residents relative to the size of domestic foreign exchange markets and increases in derivatives and algorithmic foreign exchange trading activities, exchange rate could at times act as an amplifier

implications for currency valuation need to adopt a “ broader view ” that takes into consideration not only current account imbalances but also capital flows which have become much larger than current account flows ; taking a narrow perspective of current account imbalance alone could lead us to a policy misstep. and third, central banks should have a collective voice on how much central banks can do, and to what extent further monetary easing can prop up the economy facing with structural challenges and trade disruptions. when we think about policy space, we must not look at the zero lower bound, effective lower bound, or the optimal size of central bank ’ s balance sheet. we must also be aware of the “ financial stability lower bound ” : how much additional financial stability risks we are willing to take. this is so that the financial market would have a realistic view of monetary policy and not expect central banks to engage in excessive easing that might result in long - term financial instability. preparing for the new macroeconomic thinking in the world of bilateralism this brings me to my third and last issue which is the importance of multilateral framework and international cooperation in a world that is becoming more and more polarized, both geopolitically and economically. multilateral frameworks that have worked so well for us in the past recently got challenged by gravitation towards inward - looking policies and bilateral economic relationships, and that has sent shockwaves to emerging nations on the periphery. the drift towards bilateral - and trade - focused international economic policies which bypass existing channels of trade conflict resolution severely undermines global governance of international trade. on their own, ems have little bargaining power, and engaging in bilateral relationships with large countries could result in trade distortions and uncertainties that lead to inefficient allocation of resources. in addition to the direct impact on trade, this bilateral - and trade - focused thinking could lead to another serious implication, especially from the perspective of macroeconomists who are well - represented in this room : the distortion of macroeconomic policy framework. the global imbalance analysis illustrates this issue nicely. the existing framework that was developed by the ifis prior to the gfc and was adopted internationally has been pivotal in the way we made policies to address global imbalances in the past. i have talked earlier about how the current framework based on current account balance alone needs to progress with the changing environment, the excess liquidity in the global financial system, and take a broader view that includes capital flows. i am