the ecb through the ltro is used wisely, to put an end to the fiscal crises and the resultant financial instability. a natural question at this juncture would be how to consolidate the financial gains achieved so far, and what to do to pull the world economy out of its current troubles. i think revisiting the dynamics of the global financial crisis, and the ensuing fiscal crises in advanced market economies – or ames in short – could offer us clues to help answer these questions. ii. reversing the direction of real - financial and cross - border linkages let me be more specific. some eighty years of macroeconomic research and policy lessons guided us to the deployment of extraordinary monetary and fiscal stimulus measures in response to the global bis central bankers ’ speeches financial crisis, and these policies did pay off by enabling us to avoid another great depression. success was short - lived, however, as the world economy instead fell into the great recession. adverse feedbacks through real - financial linkages triggered fiscal crises in ames, particularly in the euro area, which pose threats to global financial stability even today. despite their own sound fundamentals, meanwhile, emerging market economies – or emes in short – have become the hostages of cross - border linkages, both real and financial, as they have faced weak and highly uncertain external demand, sharp reversals in capital flows, and heightened foreign exchange market pressures. as you may have noticed here, and as i should highlight now, there have thus been two types of linkages at the heart of the postcrisis economic and financial developments – real - financial linkages, and cross - border linkages. and the implication is thus that a global solution is necessary if we hope to return to a sustainable path of growth and financial stability. we live now in an interconnected world. and in an interconnected world, stagnant growth and fiscal crisis occurring in one region is no longer an isolated problem of that region alone. rather, it is a global problem, that has far - reaching implications for other regions and, ultimately, the world economy as a whole. i believe that our search for a global solution to the problems we now face should begin with a focus on reversing the directions of these two types of linkages – so that in place of negative spillovers we instead see positive feedbacks. and in fact, powerful real - financial and cross - border linkages are a basis for positive feedbacks just as much as they are a

by 50 basis points in all, bringing it down to its present historically low level of 3. 75 percent. a number of actions have also been taken by the bank of korea to stabilize the financial markets. it has ensured an adequate supply of liquidity through open market operations in order to counter temporary financial market unease. this emerged in march following the revelation of accounting malpractices at a few large companies and worries about credit card companies going under. it resurfaced in june when the staff of chohung bank went on strike. the bank of korea will continue to adopt a “ look at everything approach ” in the future, taking into overall account the impact of changing conditions at home and abroad on growth, prices and the balance of payments. in the course of conducting monetary policy, particular attention will be paid to alleviating potential risk factors including household debt so as to ensure the stability of the financial markets. from the start of next year, the revised bank of korea act will come into effect, substantially increasing the bank of korea ’ s powers and its degree of independence. under the revised central banking legislation, the existing practice of setting an inflation target every year will be replaced by a medium - term inflation targeting system. the central bank is also given greatly increased responsibilities for the comprehensive management and oversight of the payments and settlements system. in keeping with its heightened role, the bank of korea will strive even harder to be effective in achieving the twin goals of its monetary policy : macroeconomic stability and financial stability.