Within some range, increased market power raises rents and acts as a spur to investment, innovation and productivity. But beyond a point, those forces go into reverse. Market power is associated with a fall in innovation and investment incentives, with knock-on negative effects for productivity. There is some empirical support for such a relationship. Jones and Philippon (2016) and Gutiérrez and Philippon (2017) suggest increased market power may have reduced investment among US companies. De  14  Our results are consistent with De Loecker and Warzynski (2012) who find that exporters charge, on average, higher mark-ups and that firm mark-ups increase upon export entry. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Loecker and Eeckhout (2017) document a negative relationship between mark-ups and the capital share among global companies. And Díez et al (2018) identify empirically a concave relationship between markups and investment, in line with Aghion et al (2005). We can re-run the Díez et al (2018) investment equations using the panel of UK-listed firms. This also finds a concave relationship with mark-ups (Table 2, column 1). The same relationship holds between mark-ups and R&D expenditure (Table 2, column 2). Chart 12 plots the estimated investment curve. It suggests that firms with mark-ups above around two tend to be associated with lower investment rates, in line with Díez et al. With estimated firm-level mark-ups having risen secularly in a number of countries, this is potentially a cause for concern.
I think it is most important, in these times of uncertainty, for the Bank of Thailand to act as the linchpin to the public policy. We have to set the anchor that stabilizes the economy. It is fortunate that certain elements of our inflation targeting policy has been modified, allowing increased degree of management of the foreign exchange rate which facilitates trade and improves capital flows. The practice which was intended to take care of official reserves while the global economy is slowing down now happens to be the correct policy practice to be further enhanced to cope with addition weaknesses and uncertainties. More careful management of our international reserves is required so that we can fulfil our debt obligations under the IMF program, and still be left with a strong and healthy level of reserves. This will be achieved through a vigilant watch on the markets, keeping close dialogue with market participants, gathering intelligence and acting in a timely manner. Ladies and Gentlemen, I am here today not to give you a false promise that the BOT could provide policy measures that could lead to the recovery of the Thai economy, but to assure you that our existing policy measures are suitable with the situation and we would do our best not to allow Thailand another crisis of similar cause and magnitude as that of 1997.