ben s bernanke : the policy response to the crisis in korea and other emerging market economies speech ( via video recording ) by mr ben s bernanke, chairman of the board of governors of the federal reserve system, at the bank of korea ’ s international conference “ the changing role of central banks ”, seoul, 30 may 2010. * * * it is a pleasure to be able to participate in this conference on the occasion of the 60th anniversary of the bank of korea. i would especially like to congratulate governor kim on his recent appointment. over the years, the bank of korea has made an important contribution to the impressive economic performance of south korea, a performance that includes a more than 10 - fold increase in the country ’ s real gross domestic product ( gdp ) per person over the past four decades. the global economic and financial crisis caused hardship around the world and tested central banks in both advanced and emerging market economies. like their counterparts in the advanced economies, central banks in several key emerging market countries responded to the crisis by sharply lowering policy rates and by undertaking a variety of unconventional policy measures to support their economies. the bank of korea was among the first of the emerging market central banks to respond by reducing its policy rate by a cumulative 325 basis points between october 2008 and february 2009. it also took effective steps to increase the liquidity available to the korean financial system, for example, by expanding the set of counterparties for repurchase transactions and broadening the pool of assets eligible as collateral. to help the banking system remain stable and able to continue lending to creditworthy borrowers, the bank of korea also helped set up a bank recapitalization fund. korean banks, like those in a number of countries around the world, experienced shortages of dollar liquidity during the crisis. to alleviate these shortages, the bank of korea drew on its foreign exchange reserves. it also established a dollar liquidity swap line with the federal reserve in october 2008, which provided short - term dollar funding to the bank of korea that it, in turn, could lend to financial institutions when the operations of private dollar funding markets had become impaired. the bank of korea ’ s efforts were complemented by substantial fiscal stimulus put in place by the korean government. this suite of policy responses helped stabilize korean financial markets and promote a swift recovery of economic activity. the equity market bottomed in late 2008 and has since then retraced much of its losses. real gdp, which contracted at a remarkable 17

where do we stand? sri lanka is now a lower middle income country with a per capita income of around us dollars 1, 355. the per capita income is projected to increase further to around us dollars 1, 500 by the end of this year and is expected to continue to increase during the coming years. so, there is a clear indication that we are growing amidst several challenges and that people are enjoying the gains of the growth although some may tend to down play or disregard these national gains for whatever reason. with increased personal incomes, we also observe that living conditions of the people are improving. i already spoke about it. but, at the same time, we would be the first to admit that a lot more needs to be done. we have to attempt to double our per capita income every 6 - 7 years from now onwards. we must also aim at increasing the per capita incomes in the provinces from the present levels of between us dollars 700 - 800 to at least us dollars 1500 in the next 6 - 7 years. that is not a dream. it can be done. towards this objective, the government has clearly identified as a priority, the importance of having quality infrastructure facilities in the country. in that regard, mega infrastructure projects, particularly in the areas of power and energy, highways, rail roads, ports and aviation are currently being implemented. in fact, the government has given the highest priority in its public investment programme to complete these projects as early as possible so that development process would be accelerated. the government has also identified the need to focus on developing regional infrastructure facilities in order to stimulate economic activities in the regions as well as to quickly distribute the gains of higher economic growth to the people who are living in remote areas. the ongoing “ maga neguma ”, “ gama neguma ” and “ neganahira navodaya ” programmes are particularly aimed at fulfilling this need. in the meantime, the central bank, in collaboration with the finance commission has initiated a new approach to examine new ways of maximizing the provincial councils ’ contribution in the regional development process. we have observed that even after the existence of provincial councils for about two decades, the inequalities among the provinces still prevail and in fact have widened over the years. hence, it is clear that we have to introduce a new and innovative strategy to develop our provinces. in line with this objective, as the first step of this new initiative, the central bank and finance commission, along with