GDP growth rates for most of these economies will likely turn positive in 1999. The outlook for the year 2000 is similarly benign. Indeed, the concern for the Korean economy has even turned into one of over-heating. Asia’s nascent recovery has set it apart from other emerging economies. Discerning international investors are placing much lower risk premiums on Asian economies compared to other emerging economies. For example, the difference between the yields on Latin American and Asian US dollar bonds has risen from less than 100 basis points in August 1998 to around 250 basis points in November 1999.1 The Singapore economy too, has recovered strongly, rising together with the regional economies. GDP grew by an estimated 5.6% last year, compared to 0.3% in 1998. This year, we expect the momentum to be sustained, with GDP growth at around 4.5-6.5%. But we cannot be complacent. To ensure that Singapore continues to prosper, we need to remain competitive, regionally and globally. Global markets have become much more integrated and global competition has intensified. We need to be part of this globalisation process and not close our doors to it. This is why we have been gradually introducing more competition into previously protected sectors of the economy, such as the financial sector and the telecommunications sector. These are challenging times ahead for us. But as economic recovery gathers pace, it is easy for euphoria to overtake the need for improvement and change. It could also tempt us to scale back or postpone painful restructuring initiatives.
Marvin’s intellectual pursuit of all aspects of the ZLB logically drove him to explore the possibility for currency to have a digital component. Although many think of central bank digital currencies as a new-fangled idea, Marvin was thinking deeply about the prospect long ago. This has become one of the hot topics in the world of central banks today. The conversation that Marvin began in Woodstock in 1999 became the basis for discussions that were had later on at the FOMC meeting in January 2002. At that FOMC meeting, Marvin expanded upon the idea of asset purchases as a policy tool that he had proposed in his paper at the conference in Woodstock. He emphasized that the Fed asset purchases can affect financial conditions and thereby the economy. He was expanding the conversation away from thinking about conventional monetary policy to unconventional options, like the balance sheet. Importantly, he distinguished between central bank purchases of short-term government securities, as the Bank of Japan was doing at that time, versus purchases of longer-term securities. Marvin viewed purchases of short-term securities as ineffective under the ZLB, while he saw purchases of longer-duration securities as potentially powerful owing to a “preferred habitat” motive on the part of investors. Of course, large-scale asset purchases later became a tool of critical importance for easing financial conditions in the United States and abroad. Although the consequences of the predicted Y2K glitch were minimal, the ZLB became a central issue when the financial crisis hit.