Muhammad bin Ibrahim: Central bank collaboration in Asia – facilitating the use of local currencies for settlement of trade and investments Remarks by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Signing Ceremony of the Memoranda of Understanding between Bank Indonesia and Bank Negara Malaysia and Bank Indonesia and the Bank of Thailand, Bangkok, 23 December 2016. * * * My delegation and I are pleased to join Governor Veerathai and Governor Agus here in Bangkok today to mark the collaboration between our central banks to facilitate the use of local currencies for settlements of trade and investments. Our economies face common challenges in managing the risks from heightened volatility in the global financial markets. We can expect continued episodes of volatility to occur in the periods ahead, driven by a combination of policy uncertainties, negative sentiment and speculative activity. The arrangements signed today are part of our continuous efforts to provide the institutional and policy framework to promote orderly financial market conditions and support the efficient management of financial risks. In particular, these arrangements will enable exporters and importers in our countries to better manage foreign exchange risks by using local currencies to settle trade and investment activities. In addition to improving cost efficiencies for businesses, the increased demand for local currency financial products will also contribute towards deepening the region’s financial markets. This is important to further strengthen conditions for regional financial stability.
This experience of slow recovery and persistently low inflation is a symptom of a deeper problem afflicting advanced economies—the root cause of which is a combination of low neutral interest 1/4  BIS central bankers' speeches  rates and the lower bound on interest rates, a topic to which I now turn. What’s Past Is Prologue Underlying these events has been a sea change in the supply side of economies, owing to fundamental shifts in demographics and productivity growth. Two demographic trends are evident: People are generally living longer and population growth is slowing. Overall life expectancy in member countries of the Organisation for Economic Cooperation and Development (OECD) has increased from about 65 years in the 1950s to nearly 80 years today, and is projected to exceed 90 years by the end of this century (Figure 6). 1 Despite this increase in longevity, dwindling birth rates are bringing population growth to a standstill. In OECD countries, population growth averaged over 1 percent back in the 1950s and 1960s, but is now running at half a percent per year, and is expected to gradually fall before dipping into negative figures by 2070 (Figure 6).2 When it comes to productivity, the changes are no less dramatic. In OECD economies, growth in labor productivity—the amount produced per worker hour—has averaged a little over 1 percent per year since 1995, about half the pace seen over the prior decade (Figure 7).