Bandid Nijathaworn: Financial globalization and emerging market economies Speech by Dr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Panel Discussion, Bank of Thailand’s International Symposium 2008, Bangkok, 8 November 2008. *  *  *  First, let me thank the organizer for inviting me to take part in this panel. A lot has been said in the last two days about financial globalization and emerging markets. We spoke about the challenge for monetary policy, the challenge for financial regulation, and the implications for capital flows management, and on this panel, we discuss the importance of having the right international financial architecture to respond to the global challenge. But more important at this time, I think the current global financial turmoil also offers a unique and important perspective for us to look closely at financial globalization, in terms of the inherent risk, the lessons that can be learned, and how emerging markets should go about managing the process of financial globalization. My remarks today will be on the practical challenge faced by emerging market economies like Thailand in managing the process of financial globalization. On this, I will focus on the financial sector and the implications that financial globalization has for the financial sector in emerging markets. A good starting point to discuss the issue is to look first at the lessons that can be learned so far from the current turmoil.
And, although we bring as much economic and statistical science to bear as we can, we know that our forecasts, and indeed our policy judgements, are subject to a range of error. They cannot be accurate to every last digit. We can't expect to hit the target all the time, but by consistently aiming to do so (and we do consistently aim to do so looking 2 years or so ahead - whatever you may have read in some recent media commentaries) we can hope to get reasonably close to the target on average over time. Given the uncertainties, which are well illustrated by the sudden - and no doubt to some extent erratic - jump in the RPIX inflation rate in the year to January of 2.6% announced this morning, the overall results over the past decade since the recession of the early 1990's have been encouraging. Whether that's a result of good luck or good judgement I leave to others to decide - I'm more interested in the outcome. Since the Summer of 1992, inflation, on the target measure has averaged just 2.6% - and has been more stable than at any time in our history. And it has been consistently remarkably close to target over the past 5 years. But the even better news is that stable, low, inflation has been accompanied by steadily increasing overall output and employment, and by a progressive fall, until very recently at least, in the rate of unemployment.