increasing contagious consequences in global economic and financial system. second is the institutional shift represented by an increasing role of non - banks and shadow banks, especially in some advanced economies. this has long been a trade - off for policymaking between economic and social considerations. on one hand, the shadow banking sectors undoubtedly provide financial opportunity to those with limited access. this institutional development also has encouraged higher competition in the financial system, leading to greater efficiency. on the other hand, this informal financial sector remains under - regulated and may incentivize risky activities, such as overleveraging, which could become systemic and prone to produce adverse outcomes to the system. bis central bankers ’ speeches the third development is what has taken the forefront role as an underlying driver of the recent crisis and policies that follow. it is the increasing interconnectedness amongst economies and financial markets. rapid integration of international trade and finance has led to promising economic prosperity. however, the increasing co - movements of business and credit cycles globally also played an important part in amplifying and spreading booms and busts cycles across the economies. this new financial environment has set stage for possible negative impacts both in terms of magnitude and depth on the real and financial sectors, especially those of the advanced economies. to that extent, we have witnessed, the deployment of unconventional sets of monetary policy instruments in order to shore up the economies and financial markets. part ii : responses to crisis and policy spillovers to emes : new trends of monetary policy ladies and gentlemen, the implementation of the extra - ordinary policies and financial reforms in advanced economies to tackle the crisis has generated momentous spillovers upon emerging market economies. these unintended effects are, mainly, ( 1 ) liquidity surge that drove up financial market volatility and created significant demand for safe assets, and ( 2 ) regulatory reforms in the financial system, mostly the banking sector, which raised the operating costs of financial institutions amidst heightened risks in the financial system. moreover, the situation had worsened as it added to the direct impact of weakened global demand. although the spillover impacts to individual economies have been uneven, monetary policy in most emerging markets have faced a tradeoff between achieving domestic objectives and managing external spillovers. the limited and, in many cases, stretched monetary policy tools have been designed to mitigate financial imbalance and vulnerability, and to restore economic growth and maintain targeted inflation. our experiences from various quantitative easing ( qe ) episodes remind us that the traditional monetary policy at

prasarn trairatvorakul : regional trends for monetary policy and the possibility of regional collaboration speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the 14th international convention of the east asian economic association ( eaea ), chulalongkorn university, bangkok, 2 november 2014. * * * distinguished guests, honorable speakers, ladies and gentlemen, it is my pleasure and privilege to speak at the 14th international convention of the east asian economic association. first of all, i would like to express my sincere gratitude to the hosts for inviting me as a part of this esteemed forum, which brings together economists, academics, and officials from all over the region. our countries have been overwhelmed by clouds of uncertainties in both domestic and external fronts. so far, the question we have repeatedly asked ourselves is “ what can ‘ we ’ contribute to sustain the recovery and better safeguard our economies? ” and as “ we ” gather here today, i am confident that this is an opportunity for “ us ”, to exchange knowledge and experiences, that would greatly support the development of regional economies and strengthen our regional cooperation. today, i would like to share my thoughts in pursuit of the answers to our question from a policymaker ’ s perspective. i will begin with what i see as the major contributors to the past global financial crisis. then i will touch upon the conduct of monetary policy amongst emerging market economies in response to the past crisis as well as its spillovers. last but not least, i will share my views on good policy preparations and highlight the importance of policy collaborations, so that we, collectively, could better withstand the impact of the crisis going forward. part i : major developments that have contributed to the past global financial crisis ladies and gentlemen, looking back on what we have experienced in the past decade, the recent crisis has caused tremendous impacts with repercussions at the global level. on a more positive side, however, the crisis has revealed three major developments in the financial system, which have shaded some light on the inadequacy of existing policy framework for our future preparations. first is innovation, in response to the shift in the global financial system landscape. the sophisticated financial instruments have been developed to serve rising demands from all types of investors with different risk - return appetites. however, such a creation has resulted in products that disguised the genuine financial risks. moreover, systemic risk stemming from complex nature of such products have led to