Published assessments of policy impact can improve public understanding of, and debate about, often difficult distributional choices. 9  When it comes to monetary policy, the position until recently has been rather different. There has been no particular clamour for published assessments of the distributional impact of monetary policy. Why? Because monetary policy has benefitted from, not one, but two “Get Out of Jail” cards. Both have their origin in Milton Friedman’s 1968 Presidential Address to the American Economic Association, half a century ago. 10  The first follows from the neutrality of monetary policy with respect to real variables over the longer run. 11  Typically, this neutrality is associated with the total level of resources in the economy, such as employment or output – the vertical long-run Phillips curve. But neutrality applies, with no less force, to the distribution of resources in the economy, whether between sectors or regions. In theory, monetary policy ought also to be neutral in its longer-run impact on economic inequality. 9 10 11  For example, Ball et al (2013) and Büchs et al (2011). Friedman (1968). Patinkin (1987) traces the history of thought relating to the neutrality of money. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  The second Friedman point is that the monetary policy tools of the trade should be simple and singular – for example, the money supply or short-term interest rate. These instruments are levied at an economy-wide level.
Prasarn Trairatvorakul: Monetary policy in an interconnected global economy Opening remarks by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at a conference co-hosted by the Bank of Thailand and the International Monetary Fund, Bangkok, 1 November 2013. *  *  *  Distinguished Participants, Ladies and Gentlemen, I am delighted to welcome you to this conference on “Monetary Policy in an Interconnected Global Economy,” co-hosted by the Bank of Thailand and the International Monetary Fund. I would like to especially thank our international guests who have travelled a long way to be with us today. This conference will focus on several issues pertaining to cross-country linkages, international shock transmission, and how monetary policy should be conducted in response to global spillovers. One of the most important trends over the past decades is the rapid integration of international trade and finance. Trade in goods and services, as a share of world GDP, increased from around 15 percent in the early 1980s to around 25 percent before the start of the crisis in 2007. These developments reflect, in part, the increasing internationalization of production through vertical trade linkages. We have also seen a significant increase in financial integration. While the annual growth in world trade over the past 40 years has exceeded the growth in world GDP by around 2.6 percent on average, growth in international external positions outpaced growth in world GDP by almost double that – around 4.8 percent. What are the implications of these tighter trade and financial linkages?