Ravi Menon: The quest for an integrated macro policy framework

Opening remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Asian Monetary Policy Forum and MAS-BIS Conference on Macro-Financial Stability, 26 May 2021.

Central bank speech  | 
28 May 2021

Mr Agustín Carstens, General Manager, Bank for International Settlements,

ladies and gentlemen, good afternoon and welcome to this year's special edition of the Asian Monetary Policy Forum featuring the MAS-BIS Conference on Macro-Financial Stability.

Macro-Financial Stability: Theory Trying to Catch up with Practice

The origins of this conference go back to a conversation that Agustín and I had about 18 months ago on the need to crystallise a coherent policy framework for macro-financial stability. 

For the three decades preceding the global financial crisis, the traditional inflation targeting framework for monetary policy has served most economies well, delivering price stability as a basis for sustained economic growth. 

That framework is now coming under strain.

  • Emerging market economies ("EMEs") faced with large and volatile international flows of capital have had to resort to a variety of policy tools besides traditional monetary policy to achieve both macro-economic and macro-financial stability.
  • The advanced economies faced with rising leverage and growth in financial assets against the backdrop of extremely low interest rates are also looking at macroprudential measures to promote financial stability.

Practice has moved ahead of theory.  In the absence of a conceptual framework, EME central banks facing large capital flows have had to experiment with the tools at their disposal – such as foreign exchange intervention, macroprudential policies, and capital flow management measures.

  • There is now a rich body of policy experiences, especially in emerging Asia, crying for a theoretical framework. 
  • We need a framework that provides coherence not only across these various policy tools but also with traditional monetary and fiscal policies.

There is an active research agenda at the BIS on such an integrated policy framework.  As a practitioner of some of these policies, MAS is delighted and honoured to organise this conference together with the BIS.