. in spite of price stability and a current account surplus, economic activity has remained in the doldrums. thus the bank of korea lowered its call rate target by 50 basis points in all to support a recovery of economic activity, bringing it down in may and july from 4. 25 percent to the current 3. 75 percent. for its part, the government has expanded fiscal spending. it drew up supplementary budgets of 6. 3 billion dollars ( 7. 5 trillion won ) in all during this year. prospects of korean economy for the next year looking ahead, as the effects of this pump - priming policy become evident and the world economy, notably that of the united states, continues to show clear signs of recovery, we expect a gradual improvement in the korean economy. in the third quarter, gdp growth already increased to 2. 3 percent from the 1. 9 percent of the second quarter. it is thought that the economy has now bottomed out and moved into a phase of mild recovery. next year korea ’ s gdp growth is expected to rise to 5. 2 percent. for its part, core inflation for the next year is anticipated to show stable movements at 2. 8 percent. we are looking to see a current account surplus on a scale of around 6 billion dollars. changes in the growth environment and tasks for sustainable growth if we judge the korean economy only by the prospects for next year ’ s growth, prices and current account position, we might think that it has no serious problems. seen from a long - term perspective, however, the growth environment surrounding the korean economy has been changing very fast. how appropriately we respond to these changes will be decisive for the future of the korean economy. these changes in the growth environment can largely be summarized under three headings. the first is the korean economy ’ s shift from a low wage system to a high wage system. the second is the dynamic rise of the neighboring chinese economy with its unlimited resources of low wage labors. and the third is that the korean economy is inevitably exposed to the worldwide revolution of openness. due to the combined shock of three major changes, korean companies and products that have grown up under the previous low wage and protectionalist framework are destined to lose much of their competitiveness. therefore, short - term pump - priming measurers are insufficient to sustain a solid growth path for the korean economy in the long run. heightening competitiveness through the structural reform i am about to describe is of over - riding

orthodoxy to turn the crisis into the beginning of a new era. taking the opportunity given me here today, i would like to address several critical issues related to future monetary and macro - prudential policy, and to say a few words about strengthening global cooperation to achieve financial stability. global financial crisis and monetary policy the global financial crisis, as we all know, started in the financial sector but has eventually led to fiscal crises in many advanced economies, not to mention a global recession. in response to the crisis, central banks around the world undertook a wide range of measures. policy rates were cut swiftly, and non - conventional measures were also deployed including, among others, large - scale term - loans to troubled financial institutions, outright bis central bankers ’ speeches asset purchases, and interventions in credit markets. these measures have helped support financial markets and thereby avoid financial meltdown. despite such success on the financial front in the early phase of the crisis management, monetary policy fell short of avoiding deep recessions, which in turn triggered severe strains on the fiscal status of many advanced economies. the ensuing eurozone fiscal crisis is still an on - going event that is preventing the global economy from recovering a sound growth momentum – even four years after the outbreak of the global crisis. as we have seen in many instances, central bank activism is indeed pivotal in crisis management. but we should also be mindful of potential adverse side effects. socializing private losses may easily lead to moral hazard while central banks'over - stretched balance sheets could end up constraining the flexibility of future policy operations. massive increases in official liquidity may have negative spillovers across sectors and national borders. in this light, we should keep in our mind that monetary policy is no panacea. i believe that an indepth review of post - crisis monetary policy and its outcomes, including both successes and failures, should be a first step toward establishing new thinking on monetary policy. to be complete, however, our new thinking should go beyond its operational aspect to cover more fundamental dimensions such as the mandates and the governance structure of the monetary policy as broadly defined. i believe that new thinking on such dimensions is essential to our efforts to build a stronger institutional basis for crisis prevention. many specific questions arise in this regard. should the mandate of monetary policy be broadened to include financial stability – particularly in the context of inflation targeting? how should monetary policy be coordinated with macro - prudential policies? who should bear the responsibility of keeping financial stability if