off. flows of foreign direct investment into the korean manufacturing sector stood at 2. 9 billion dollars in 2001, but this figure has continued to shrink since then, reaching 2. 3 billion dollars in 2002 and just 1. 7 billion dollars last year. owing to this reluctance to invest in the country on the part of both home and foreign businesses, we are witnessing the polarization of korean industry and so - called jobless growth. businesses involved in the high - tech sector, exporters and large companies are now generally showing fast rates of growth. on the other hand, companies in old technology sectors and smes dependent on domestic demand are becoming less and less competitive. what this means is that, with the contraction of the laborintensive industries, in which smes predominate, there are fewer new job opportunities opening up even though gdp may be growing. what has brought about this state of affairs is the tectonic drift taking place in the locus of global manufacturing activity. you will all, i think, be familiar with how the dynamic core of global manufacturing moved in the 1960s from the united states to japan, and in the 1980s from japan to the newly industrializing economies including korea. since the early 1990s, it has been shifting to china and, as a part of this process, korea is experiencing the hollowing - out of its own manufacturing sector. earlier hollowing - out of u. s. and japanese manufacturing each of these shifts in the locus of world manufacturing production, that is to say these processes of the hollowing - out of previous manufacturing bases, has had its own distinct characteristics. even so, there has been a common thread running through them all, which is that their root causes have lain in losses of competitiveness due to high costs and low efficiency. u. s. wage levels back in the 1960s were four times higher than japan ’ s. in contrast, the rate of manufacturing productivity increase in the u. s. was less than one fifth that in japan. later, as wages, house prices, and land prices were continually rising in japan from the early 1980 ’ s, while manufacturing productivity growth was only one half that of korea ’ s, japan also began to experience fade - out in its manufacturing. however, i should point out that when the process of hollowing - out was underway in the u. s. and japan, the scales of the economies to which the torches were being passed were relatively small. to be exact, the japanese economy

chang yong rhee : an integrated policy framework - application to korea's monetary policy keynote speech by mr chang yong rhee, governor of the bank of korea, at the korea international economic association winter conference, seoul, 23 december 2024. * * * introduction today, i would like to discuss the integrated policy framework ( ipf ), which is emerging as a new holistic approach to the implementation of monetary policy, and share with you how this framework has been applied to the bank of korea's monetary policy through two practical examples. over the past two and a half years, the bok has faced criticism for what some view as hesitation and delay concerning policy decisions. one of the criticisms has been that, despite adopting an inflation targeting framework, the bok has not focused solely on price stability, but that it has also considered other factors, such as exchange rates, household debt, and real estate prices. this broader focus has led to concerns that the bok may have missed the optimal timing in terms of adjusting interest rates during both the tightening and easing phases. however, since the global financial crisis, there has been a growing consensus among international organizations such as the imf and the bis, as well as across academia, that emerging economies without reserve currencies could benefit from complementing traditional monetary policy with other policy tools, such as foreign exchange intervention and capital flow management, all as part of an ipf. the imf has acknowledged the effectiveness of such tools, like foreign exchange intervention and capital flow management policies, that were previously under - appreciated. indeed, i contributed to these discussions during my time as the imf director for the asia - pacific region. thus, today, i will illustrate how the bok has implemented this integrated approach through two cases : the financial and foreign exchange market instability we saw in late 2022, and the decision to hold the policy rate steady in august 2024. the integrated policy framework non - reserve - issuing economies face constraints in achieving both price stability and financial stability through traditional monetary policy alone. this is primarily due to the high volatility in capital flows and exchange rates that arises from their heightened sensitivity to changes in global financial conditions. more fundamentally, these economies are limited in their ability to act as lenders of last resort in the foreign exchange market. as a result, international organizations such as the imf and the bis have begun analyzing how non - reserve - issuing economies can more effectively achieve price stability and financial stability by employing a combination