Honorable Governor Kim Choongsoo,
Distinguished foreign central bank governors,
Ladies and gentlemen!
Good afternoon.
It is a great pleasure to welcome you all to the International Conference 2010, commemorating the 60th anniversary of the establishment of the Bank of Korea.
Let me also express my appreciation to the organizers for inviting me to this conference.
Having started my career at the Bank of Korea right after college in 1970, I feel very much at home among the many central bankers gathered from around the world.
In this year 2010, we look back sixty years to the outbreak of the tragic Korean War while, at the same time, celebrate the 60th anniversary of the establishment of the Bank of Korea.
As you are aware, Korea has risen from the ashes of war to successfully achieve industrialization and democracy.
Today, Korea enjoys more enhanced prestige in the international community. We joined the OECD Development Assistance Committee. Korea is the host to this year's G20 Seoul Summit and the next host for the Nuclear Security Summit in 2012.
Now, Korea is well on its way to becoming an advanced economy, most willing and capable of returning the benevolence we once received to the world.
These achievements were powered by Korea's all-round competitiveness in recovering from multiple crises, Korea's growth potential, and institutional capacity.
I would like to express my admiration to the Bank of Korea for its unwavering dedication and commitment since 1950 in maintaining sound policies in the advancement of the Korean economy.
Distinguished participants,
Korea's sovereign credit ratings were raised recently in spite of remaining uncertainties surrounding the world economy. Korea is being held up as a model among OECD countries in having successfully handled the financial crisis.
However, the Korean economy still needs to deal with various challenges in the wake of the global financial crisis.
Even with relatively sound economic fundamentals including low and stable inflation and substantial foreign exchange reserves, the weakness of Korea's externally dependent economic structure became evident in the course of the crisis.
Meanwhile, discussions on the realignment of the world economic order have been initiated in some quarters as a 'shift of power' becomes gradually apparent.
In the aftermath of this crisis, burgeoning market economies, especially China, will spur on the multi-polarity of the global economy and bring about structural changes in the international financial markets which have so far been dominated by advanced countries.
Accordingly, we anticipate that the G20, embracing both advanced and emerging economies, will contribute to the making of a post-crisis global economic architecture.
Scholars and policy-makers are also called upon to think out of the box in terms of the prevention and containment of crises.
Especially in the world of finance, we can look for fundamental changes in the financial regulatory system with an emphasis on ‘back to the basics’, to support the real economy and build a new international financial architecture.
Historically, central banks have always played an important part in periods of economic change. Central banks have frequently assumed new roles and have produced solutions in the process of crisis prevention, management and resolution.
I thus believe the main theme of this conference, “The Changing Role of the Central Bank,” is indeed appropriate and timely in defining the central banking system in the 21st century.
I expect that the well thought-out opinions expressed during the discussions will facilitate policy cooperation among central banks. Furthermore, they will be of great practical assistance in working toward a solution of the major issues that may determine the future of the global economy. These include securing an international system of economic cooperation, reforming financial regulation, and constructing a global financial safety net.
Ladies and gentlemen,
Before becoming the Prime Minister, I worked as an economics professor for more than thirty years, and central banking has always been the first priority on my research agenda. In this respect, I now find myself very much interested in each and every topic that is to be discussed in this Conference.
By the way, let me take this important occasion to touch upon central bank independence.
Although the broad theme of the Conference today and tomorrow is the changing role of central banks, it is important for us all to be reminded of there being some unchanging features of central banking that should be respected and preserved all the more for having been undergoing the current global crisis. I believe that central bank independence is one such feature.
We have long cherished the proposition that central banks must be independent from politics. The basis for this long-lived notion is that central bankers, unlike politicians who are destined for a short time horizon, must be farsighted.
It was Alan Blinder of Princeton University that took a step further in this direction, in his 1998 masterpiece titled Central Banking in Theory and Practice, to put forward a new notion that central banks must be independent from the financial markets as well. And in ten years from then, Blinder's dictum proved all too correct when the current global financial crisis erupted in Fall 2008.
Central bankers certainly need to pay due respect and attention to the markets. By their very nature, however, markets tend to be vulnerable to fads and fancies, often generating over-reactions and speculative bubbles.
That is, markets have short time horizons, after all! It is thus important that central bankers, equipped with long time horizons, should lead, rather than follow, the markets. This is what I consider to be the essence of Blinder's message to central banks today. I may add that it has policy implications to the current, world-wide debate on exit strategy.
Now, I trust you will have a fruitful time throughout the remainder of the Conference sharing your profound thoughts on the problems we confront at present.
Before I close my remarks, let me voice my sincere congratulations to all of you for successfully staging this outstanding Conference marking the 60th anniversary of the Bank of Korea.
Once again I thank you for your invitation and wish you and your families the best of health and the greatest of happiness.
Thank you.
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