management measures. our historical experience tells us that there is no one - size - fits - all solution to problems associated with volatile capital flows. country - specific circumstances and management capacities have to be taken into account to come up with a varied policy mix involving foreign exchange rate adjustment, market intervention, monetary and fiscal policies and capital flow controls. 7 in the medium and long term, economies should consider following a three pronged approach consistent with individual local circumstances : firstly 1 ) capacity - building to cope with volatile capital flows, secondly 2 ) strengthening macro - prudential regulation, and thirdly 3 ) enhancing international financial cooperation. 8 1 ) individual countries ’ capacity building to cope with volatile capital flows with growing economic integration, the effects of individual economies ’ conditions on other economies are growing, and the importance of each economy ’ s stability has increased further as a result. with a view to stability, sound macro - economic policies are the first line of defense in reducing economies ’ vulnerability to external shocks. events that might trigger a crisis should be forestalled preemptively by avoiding a build - up of short - term external debts and maintaining an appropriate level of foreign reserves. what is more, financial sector capacity building is important, by for example, expanding the basis for the foreign exchange market over the medium and long - term, so that surges in capital flows can be absorbed. 2 ) strengthening macro - prudential regulation sharp surges in capital flows are analyzed as brining about the deepening of systemic risks in addition to the changes they cause in monetary policy transmission channels. to minimize their adverse side effects, it might be helpful to look into non - macroeconomic options for moderating capital flow volumes. the imposition of regulations by an individual economy, including a tobin tax, needs to be undertaken with caution, as it can give rise to regulatory arbitrage and reduce international confidence. properly - designed and well - implemented prudential policies may play an effective role in alleviating capital flow pro - cyclicality and minimizing the policy side effects. jaime caruana, “ capital flows to the emerging market economies : a perspective on policy challenges ”, the 46th seacen governors ’ meeting ( ‘ 11. 2. 24 ~ 25 ) keynote speech press release from korea ministry of strategy and finance, “ g20 finance ministers ’ and central bank governors ’ meeting, october 2011, paris ” although there is no clear definition of capital controls, the oecd ’ s “ code

and north america. in this connection, the peoples of asia must strive to carry out the responsibilities befitting that leading role. these include maintaining and enlarging their economic openness and mutual cooperation to ensure the sustained development of the world economy. the states of other regions, meanwhile, should take advantage of the dynamism of the asian economy as a new frontier for their economic development. a pressing task for the world of the 21st - century is to bring about international cooperation directed toward the raising of living standards and welfare for all. this must replace the pattern of development of state power for the purpose of aggressive attacks on other countries and to exercise control over them, as we have sometimes witnessed in the past. in this regard, the highest value should in the future be placed on economic rather than military power. in today's open world economic order, what is needed to push world economic development forward is not an exclusive monopoly on economic power, but efforts to share economic power together with neighbors. in closing, i would like to stress again the great importance of cooperative and complementary relationships between the asian economy, driving global economic growth in the 21st century, and other regions, which should make full use of the opportunities presented by this asian dynamism. 6 / 6