choongsoo kim : monetary and macroprudential policies in the aftermath of the crisis opening remarks by mr choongsoo kim, governor of the bank of korea, at the bank of korea international conference 2012 “ monetary and macroprudential policies in the aftermath of the crisis ” co - organized with the imf, seoul, 14 – 15 june 2012. * * * good morning. distinguished speakers, participants. i bid you all a very warm welcome to the 2012 bank of korea international conference. in particular, i would like to express my gratitude to professors thomas sargent, barry eichengreen, and yung chul park, dr. jonathan ostry, and all of our speakers and participants for their invaluable contributions to this conference. my special thanks go as well to the imf, our conference co - host. i am confident that this conference will provide us with an excellent forum for discussing the valuable precepts drawn from the global financial crisis, and sharing ideas in the face of risks and challenges in the years ahead. since the outbreak of the global crisis, policy community and academia in the global world have brought their minds to bear on the question of how the crisis arose and proposals for its resolution. although i am sure that these efforts need to be continued, especially so amid the sovereign debt crises in the eurozone, it is never too early to start the discussion of what direction of monetary policy should follow in the future. crises are the surface manifestation of important underlying imbalances. there is no doubt that financial and real imbalances played major roles in causing the crisis and worsening its severity. we should, however, acknowledge that a big gap between reality and our perception of it sowed the seeds of the crisis. we need, therefore, to reset our understanding of the real economy and the financial system. in fact, this has been how our predecessors overcome the economic crisis of the 20th century. the great depression changed the world as they knew it, and put their knowledge and ideas to the test. but, they were willing and brave enough to revise their views and beliefs to lay the foundation of new framework – “ macro ” economics. a crisis is accompanied by severe strains. but, at the same time, it offers an opportunity to broaden our understanding. if we can come up with a new framework that will last for decades or longer, we will be similarly remembered as another generation of economists and central bankers that overcame the previous

without close cooperation among countries. this is indeed one of the key lessons from our policy responses to the global crisis. in today ’ s highly interconnected world, financial disruptions in one country or region would be no longer a problem of the country or region alone. by the same token, policy measures taken by a country can easily affect other countries. for example, extraordinary monetary easing by major central banks does appear to have helped their home countries contain the fallout from the crisis. but many emerging countries were forced to confront adverse financial spillovers from large and sharp swings in the global liquidity condition. in short, coordinated global efforts to rein in the excessive global liquidity and cross - border spillovers have fallen short of expectations. and we all know too well that international policy cooperation has always been difficult to achieve. but history is not destiny. nor does it mean that we should give up. a global solution is needed more than ever to overcome the current crisis, which is a global problem. and for the benefit of all, the global community should be more united than ever in tackling the enormous challenges that lie ahead of us. concluding remarks ladies and gentlemen, the world economy is still struggling to find its way out of the great recession. it is in need of stronger and wiser policy actions that can address the very complex economic and financial troubles we are facing now. but our understanding of what went wrong and what should be done is still incomplete. this is even more the case if we turn our attention to the future of the global financial system and to the monetary and macro - prudential policy framework. as i mentioned earlier, i believe that global policy cooperation should be a priority in our search for an exit from the current crisis. i also believe that effective collaboration between policymakers and academia is every bit as crucial as that between policymakers. we do not sit idle by during the crisis. nor should we sit idle by, being complacent with the conventional wisdom. we must bridge the gap between reality and our perception of it. it is our duty and indeed our very real privilege to engage in and work through the conundrums we encounter today. i look forward very much to a new thinking on monetary and macro - prudential policy. and i am confident that this conference will contribute to developing the new thinking that we all need. once again, i wish to extend my heartfelt appreciation to all participants, and my hope for your active discussion of new insights and views