Agenda

Target audience: policy makers and practitioners from ministries of finance and planning, central banks and commercial banks, and financial regulatory agencies.

Partners: San Francisco Federal Reserve Bank, Bank of England, Bank for International Settlements, and IMF Research Department, Korean Ministry of Strategy and Finance, Bank of Korea.

[Day 1] May 23: Module 1 on Challenges to Global Economic Growth

Session 1: Challenges to Managing Capital Flows and Growth in a Multi-polar World Economy
Over the last few decades, the rise of emerging market economies, particularly enhanced by increased mobility of goods and services and capital flows, has resulted in a dramatic transformation of the global economy. Although the new globalization landscape which has emerged from this transformation is more inclusive—with developing countries accounting for an increasingly larger share of global trade and foreign reserves—it has also come with a number of challenges, not least global transmission of risks and recession, global imbalances, rising fiscal deficits, and the New Normal. This session provides a comprehensive overview of challenges associated with the new globalization landscape and the limits to globalization. It also discusses the transmission channels through which different countries have been affected by the crisis and the extent of impact.
Speaker: Raj Nallari, World Bank/Abayomi Alawode, World Bank

Session 2: Capital Flows : Lessons from the Crisis
This session will analyze the features of the reversal and recovery of capital flows as a result of the global financial crisis. Among the aspects that will be discussed are (i) the contraction of capital flows and recovery following the Lehman bankruptcy in Sep 2008; (ii) the transmission of the crisis to EMEs, notably the impact on financial intermediation and debt markets. This includes the role of supply and demand factors in cross border financing; effects on foreign exchange markets and on domestic financial systems; (iii) recent changes in composition of capital flows and the role of push and pull factors; (iv) lessons from the crisis on risks and appropriate policies looking ahead.
Speaker: Ramon Moreno, Bank for International Settlements

Session 3: Economic and Financial Integration in East Asia
This session will review the progress and some salient features of trade and financial integration in East Asia since the Asian financial crisis. We will analyze the current situation in trade and financial integration in the region from various perspectives, and discuss potential linkages between intra-regional trade and financial integration. Then we will assess recent developments in financial integration in East Asia based upon its analyses, and also discuss its policy implications and challenges focused on financial development and intra-regional integration in East Asia taking account of the post-global crisis policy landscape.
Speaker: Jang, Hong Bum, Bank of Korea

[Day 2] May 24: Module 2 on Financial Regulation in the Aftermath of the Global Crisis

Session 4: Emerging Regulatory Challenges to the Global Financial Architecture
The global economic and financial crisis triggered by the US sub-prime crisis highlighted the risks for financial deregulation for growth, and more generally for the overall international financial architecture in a context of rapid transmission of risks. This crisis has raised the specter of regulatory challenges in a context of increased financial deregulation. Some of these challenges include the management of assets and price bubbles, moral hazard under the too-big-to-fail underlying hypothesis, narrow versus broad banking, domestic versus global regulation. This session provides a comprehensive overview of financial regulatory challenges which have emerged from the global crisis and discusses the upgrade to Basel II and ongoing trends and thinking in the policy arena.
Speaker: Mark Spiegel, San Francisco Federal Reserve Bank

Session 5: Predicting Financial Crises through Early Warning Systems: How Well Can We Do?
This session will examine the performance of parametric models in predicting relative performance in the recent global financial crisis. The session will review recent research examining the correlations between a wide variety of measurable indicators of vulnerability characteristics displayed by countries going into the crisis and their performances. The session will also review the alternatives available for assessing national vulnerability, and discuss the issues associated with implementing policy changes in response to observed vulnerabilities.
Speaker: Mark Spiegel, San Francisco Federal Reserve Bank

Session 6: The role of Macro-Prudential and Related Instruments
Recurrent capital inflows pose important challenges for authorities in emerging market or developing economies seeking to preserve financial stability. Authorities have used a number of instruments to mitigate the effects of capital flows, and the global financial crisis has raised interest in examining them from a financial stability, or "macroprudential" perspective. This session will discuss some of these instruments, including foreign exchange market intervention and foreign reserve accumulation; measures to strengthen bank balance sheets and capital and measures to maintain the quality of credit or to influence credit growth or allocation, and capital controls. Certain implementation issues are also discussed, including signals to respond to, timing of prudential measures and procyclicality and effectiveness and calibration. An unresolved question is how the instruments described are to be used in conjunction with interest rate policy. Over the medium term, these instruments raise concerns because they may impair the development of the financial system.
Speaker: Ramon Moreno, Bank for International Settlements

(Country Case) Macro-prudential Measures and Bank Levy in Korea
Korea has experienced the two financial crises in 1997 and 2008, which severely affected Korean financial market and led to massive foreign outflows. After the global financial crisis originated in the US in 2008, Korea has tried to prepare sound macro-prudential measures to cope with the volatility of foreign capital flows. Korea adopted macro-prudential bank levy in April, 2011, and this will take effect in August this year. This session will review Korea’s macro-prudential measures mainly focused on Bank Levy, and discuss the implication of these measures for the global financial markets.
Speaker: Kangho Lee, Korean Ministry of Strategy and Finance

Session 7: Capital flows in Eastern Europe: Stylized Facts, Challenges and Policy Responses
There have been many similarities between the effects of the financial crisis that hit Eastern Europe and the Asian crisis of 1997-1998. Both crises ended a period of large capital inflows that fuelled domestic demand and asset price booms, and led to large current account deficits. In many countries, perceived exchange rate stability and low foreign exchange interest rates encouraged corporations and households to borrow in foreign currency. In both cases, vulnerabilities were concentrated in the private sector, while public sector balance sheets remained broadly sound and public debt low. Both crises were accompanied by large output declines and sharp reversals of capital flows in most of the crisis-hit countries. This session will highlight the role of capital flows before, during and after the recent crisis for emerging European countries. In particular, it will provide an overview of the dynamics of capital flows in Eastern Europe during the global financial crisis, discuss the implications of cross-border capital flows for macroeconomic stability and financial development and highlight the challenges and issues associated with cross-border regulation of capital flows in eastern European countries.
Speaker: Ole Rummel, Bank of England

[Day 3] May 25: Module 3 on Policy Responses to Crisis and Available Options

Session 8: Policy Responses by Asian Economies - Korea & Japan  
This session reviews the various policy responses considered by Asian economies mainly focusing on Japan & Korea’s cases, including fiscal stimulus, monetary easing, bank guarantees, trade finance support etc. It will also discuss the scope for cutting policy rates and implementing expansionary fiscal policy and provide some early lessons learned from this experience over the past year and contrast it with the lessons learned from Asian crisis and more recently from Japan’s lost decade of 1990s.
Speaker: Joon Kyung Kim, Korea Development Institute (KDI)

Session 9: Monetary Unions: Lessons from the EMU
The differential fiscal and economic situations of member European Monetary Union countries have raised the question of what to do when a one-size-fits-all currency no longer fits all. Sticking to budgetary rules implies added pain for non-complying countries, while not enforcing the rules could encourage other countries to demand similar treatment, encourage inflation, and undermine the stability of the euro. This session examines the costs and benefits of monetary unions, with special emphasis on the current challenges faced by the EMU.
Speaker: Reuven Glick, San Francisco Federal Reserve Bank

Session 10: Reserve Currency Issues
The US response to the global economic crisis has dramatically increased its fiscal deficit and raised the spectrum of inflationary pressures. At the same time, the value of the US dollar has continued its steady decline. In response, a number of US creditors have once again expressed concerns about their dollar-denominated assets. This session discusses the role of the US dollar as reserve currency in a changing world. It also reviews some of the long-term challenges expected in the global currency markets within the framework of the new globalization landscape.
Speaker: Reuven Glick, San Francisco Federal Reserve Bank

Session 11: The Return of Sovereign Debt Crises
The combination of large-scale fiscal stimulus plans, financial rescue packages and falling tax revenues has led to historically large government budget deficits and record levels of actual and projected public debt in most industrial countries, many of which were already on potentially unsustainable long-run fiscal trajectories. As such, recent developments in Europe have brought sovereign debt and default to the top of the global economic agenda. This session will assess the systemic interplay between sovereign debt and the financial health and interconnectivity of creditors; the role of sovereign debt as the credit-, default- and liquidity-risk free asset in financial markets; financial-market interventions by central banks in government-debt markets; the risk of adverse debt dynamics in countries with a low saving rate relative to investment, forcing them to rely in part on inflows of foreign capital to finance their budget deficits; the importance of the gross indebtedness of countries; and the increasingly blurry distinction between public and private balance sheets due to contingent liabilities.
Speaker: Ole Rummel, Bank of England (Confirmed)

[Day 4] May 26: Module 4 on Policy Options for Managing Capital Flows

Session 12: The Rise and Role of Sovereign Wealth Funds and Hedge Funds: Part of the Solution or the Problem?
This session will focus on the rise of Sovereign Wealth Funds (SWF) and SWF behavior during the financial crisis. It focuses on the role of SWF in Financial Stability, Regulatory and Best Practice issues for SWFs and possibly for hedge funds.
Speaker: Reuven Glick or Ole Rummel/Scott Kalb, Korea Investment Corporation

Session 13 – Multipolar World and Risks for 2011-12 and Global Policy Reforms
(Panel Discussion)
Policy changes necessary to prevent the recurrence of major problems (e.g. sovereign debt crisis, currency wars, prevention of banking and financial crises in the future).