it does not seem appropriate for policy makers in korea, in analyzing their policy directions, to use the estimates of the taylor rule, with its time series also including normal times. concerns similar to these have recently been raised at the fomc meeting. these debates are expected to continue in the processes of qe tapering and interest rate normalization. please refer to jeremy stein, “ incorporating financial stability considerations into a monetary policy framework ”, march 21, 2014. bis central bankers ’ speeches to be more specific about policy concerns by looking at an example, the biggest challenge in crisis management is that while it is difficult to find measures minimizing type i errors in policy implementation, this process unintentionally create type ii errors frequently. since the costs of a type 1 error of not foreseeing a crisis coming could be politically lethal, particularly in an environment of deepening globalization, we cannot help but be conscious about the probability of tail risks evolving into systemic risk. we can therefore easily make a type ii error, of sending the wrong signals, by talking about the issue of tail risk even when the chance of a crisis arising is not so high. and if such errors accumulate, the subsequent social costs cannot be ignored. further, given the self - fulfilling psychological effects of a type ii error, the adverse effects cannot be downplayed. although the cost may not be very evident right now, as a policy decision - maker and an economic expert this is an issue that one cannot but feel considerable intellectual burden. the most outstanding phenomenon of the global financial crisis has been the surge in global liquidity, which is an aftereffect of quantitative easing. it is very natural that abundant liquidity brings about changes in prices and amplifies the degree of market volatility. in carrying out policies in an open economy system, especially for a small open economy, low volatility in foreign exchange rates play a very important role. as trend of globalization progresses, the importance of foreign exchange rates is becoming ever greater. 9 judging from our experience, foreign exchange rates have been proven to over - shoot, markets to overrespond and therefore policy authorities are often observed to have the tendency to overreact. this means that there is an immanent risk of maximization of type ii errors. a case in point is implementing a policy without considering how much the potential growth rate has declined. i do not think that i need to emphasize the importance of the gdp gap again here,

devote continuous efforts to becoming world number ones in their own positions. one cannot become a leading organization by work of others. we should be at least as good as other central banks. in a leading organization those in the higher ranks are very busy, while in an organization that lags behind the opposite is true. i would like to stress once again that only when we are equipped with the latest weapons can we protect the national interests in an environment of global competition. as one of a central organization of our nation, please remember that there is no greater purpose of our foundation than contributing to the development of our national economy. it is our pride to bring central bank closer to the citizens. only the determination to walk to less traveled road would ensure success. the last four years can be expressed as having been tumultuous. i hope that the fire that i have lit inside you keeps flaring on, and i believe that competent executives, director generals, and team heads will lead this organization well with their experiences accumulated so far. i also look forward to your initiatives so that the bank of korea can take off even further. i began my farewell address by citing a line from general macarthur, and i would like to conclude by citing again some other words that he said : “ old soldiers never die, they just fade away. ” i would like to just fade away now as a regular citizen, keeping in mind the precious connections that i have made with all of you. thank you. bis central bankers ’ speeches