It is my pleasure to welcome you to the Bank of Korea International Conference 2023, to be held on June 1 & 2 under the theme of “Policy Challenges After the Pandemic.”
The COVID-19 pandemic presented significant challenges, not only in terms of infection prevention, but also from an economic standpoint. Prior to the pandemic, economists and policy makers were grappling with the issue of secular stagnation. Both growth and prices were remaining low, even though policy authorities had implemented substantial accommodative policies to overcome the recession following the Global Financial Crisis (GFC). Then, after the pandemic, inflation rates began to soar in the second half of 2021.
Central banks have responded to this surge in prices by raising policy rates, which in major countries have now reached their highest levels since the GFC. While the high level of interest rates is expected to contribute to price stability, it may also have adverse effects on financial stability, exemplified by the collapse of Silicon Valley Bank (SVB). Moreover, increased digitalization in retail finance could result in more volatile money movements, particularly of deposits. Now, global rate hikes appear to be nearing their end, but interest rates will stay at a high level for some time. It is uncertain how these restrictive financial conditions will evolve and affect our economies going forward.
In addition to the challenges facing price stability and financial market stability, we are also confronted with other legacies of the COVID-19 pandemic. Among them, global fragmentation and digitalization are particularly noteworthy. The trend of global fragmentation after the GFC has been further exacerbated by the Russia-Ukraine war, and such fragmentation has the potential to fundamentally alter the structure of the free trade-based international trade system. Digitalization will facilitate the growth of new innovative high-tech branches of the economy. Financial systems, including payment and settlement systems in particular, are being greatly influenced by digitalization. As a result, many central banks are conducting research and experiments on central bank digital currencies.
So, the current economic situation presents us with significant challenges, and our responses will determine the outcome. I hope that this conference will serve as a valuable forum where we can share our expertise and find solutions to all the challenges mentioned above. This year’s conference is the first to be held face-to-face since the outbreak of COVID-19, which, I believe, will help us generate very active and fruitful discussions among all participants.
Finally, as a note of thanks, I greatly appreciate Professor Sargent and our Bank of Korea staff for organizing this wonderful conference. I also thank all of you for your interest and contributions to the conference, and I look forward to seeing you soon in Seoul.
- Chang Yong Rhee
- Governor
- Bank of Korea
