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Bank Negara Malaysia's Conference on "The Future Direction of Monetary Policy Frameworks and Strategies in Emerging Market Economies", Sasana Kijang, 21 May 2014

On 21 May 2014, Bank Negara Malaysia held a conference on "The Future Direction of Monetary Policy Frameworks and Strategies in Emerging Market Economies", at the Forum, Sasana Kijang. The one-day event was attended by 82 participants comprising central bankers, academics, and representatives from multilateral institutions, the Government, and the private sector.

The conference aimed to provide an avenue for discourse on the nature of monetary policy frameworks in emerging economies going forward, especially in light of developments following the Global Financial Crisis and the policy responses adopted by central banks across advanced and emerging economies. The theme and topics of the conference were centred on two key issues, namely the objectives and reach of monetary policy, and the strategies to ensure the effectiveness of monetary policy.

Deputy Governor Dr. Sukhdave Singh delivered the welcoming remarks, challenging emerging market economies (EMEs) to play a more active role in the conversation on the conduct of monetary policy. Although emerging markets had, to some extent, benefitted from emulating the practices of advances economies (AEs) in the past, there was a need to better match frameworks and strategies to the specific circumstances and economic realities of EMEs. Dr. Sukhdave highlighted that policymakers should seek clarity in the motivation for and practical usefulness of different frameworks, taking into account expanding objectives and the availability of instruments. This was particularly vital for policymakers in small and open EMEs, as flexibility was required in a highly integrated world, where the global monetary environment was mainly determined by the monetary policies of the large AEs.  

In his keynote lecture, Dr. William White began with an assessment of the current state of the world economy, which still had elements of instability and remain susceptible to setbacks. He then expounded on the deficiencies in the past conduct of monetary policy, as well as the unintended consequences and near-term scenarios associated with more recent policies in the aftermath of the Global Financial Crisis. Dr. White emphasised that central bankers had to operate within complex systems with various possible end-games, and impediments to change in the economic and financial environment. In this regard, Dr. White challenged policymakers to move away from the “more of the same”, the standard prescriptions associated with modern macroeconomics. A better way forward involved policies such as aggresive debt restructuring, structural reforms, and greater international cooperation.

The first session focused on the role of monetary policy, choice of frameworks and objectives, and the extent to which this has been influenced by changes in the economy and financial system. It was noted that operationalising the Tinbergen principle of using one instrument for one objective was not so simple given the interdependence and interactions among the objectives and instruments. Presenters highlighted that existing theoretical models did not adequately take into account frictions in the financial markets and the open economy structure. In practice, however, EMEs had pursued monetary policy frameworks with due consideration to these elements. For instance, exchange rates were found to explain monetary policy responses in several EMEs. Nevertheless, operationalising the financial stability mandate in the context of monetary policy was more difficult, given issues such as the trade-off against inflation and output goals, and choosing appropriate financial indicators as a proxy for financial stability.

The second session addressed the implementation of monetary policy under different economic and financial circumstances, the evolution of monetary transmission channels, and the choice of instruments used. Presenters further recounted the relative success of inflation targeting with floating exchange rate regimes in EMEs. It was also highlighted that the monetary transmission channels in EMEs after the Global Financial Crisis has evolved and rendered traditional monetary policy instruments less effective. The ensuing discussion focused on preserving monetary policy independence via appropriate instrument design, which included recourse to sterilised foreign exchange intervention, asset-based as well as liability-based macro-prudential tools.

The conference concluded with a panel discussion on the key changes in the economic and financial landscape and the implications on the conduct of monetary policy in EMEs. Among issues discussed were the lack of a rigorous operationalised theoretical system for achieving financial stability, echoing sentiments from the first session on theory lagging practice; the asymmetric monetary policy responses to financial stability considerations; challenges posed by normalisation of unconventional monetary policies in the AEs; as well as the evolving relationship between inflation and the output gap.

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Welcoming Remarks Sukhdave Singh, Deputy Governor, Bank Negara Malaysia [Transcript]

Keynote Lecture

Evolving Challenges for Monetary Policy: Looking Back and Forward
William White,OECD [Presentation] [Transcript]



Session 1: Rethinking Monetary Policy Objectives and Policy Preferences in Emerging Market Economies


Hans Genberg, The SEACEN Centre [Presentation]


Rethinking Monetary Policy Objectives: Why Mess with Success?
Kenneth Kuttner, Williams College [Presentation] [Paper]


Jun Il Kim, Bank of Korea [Presentation]


Rethinking Monetary Policy Objectives and Tools
Roberto Chang, Rutgers University [Presentation]


Alexandra Heath, Reserve Bank of Australia [Presentation]


Session 2: Enhancing Monetary Policy Strategies for Greater Effectiveness


Robert Subbaraman, Nomura Singapore


Keeping IT Simple
Luis Oscar Herrera, Banco Central de Chile [Presentation] [Paper]


Francisco G Dakila Jr, Bangko Sentral Ng Pilipinas  [Presentation]


External Shocks and Monetary Policy Strategy in Asia*
Madhusudan Mohanty, BIS [Presentation] [Paper]


Roberto Chang, Rutgers University [Presentation]


Panel discussion: For EMEs, what are the key changes in the economic and financial landscape (structural and cyclical) in the near future and what are the implications for monetary policy?


Kenneth Kuttner, Williams College


Sunil Sharma, IMF-Singapore Regional Training Institute


Mojmír Hampl, Czech National Bank [Remarks]


Marzunisham Omar, Bank Negara Malaysia


Michael Debabrata Patra, Reserve Bank of India [Presentation]


*Co-authored with Ken Miyajima and James Yetman.

For any inquiry on the conference, please contact: 
The BNM Conference 2014 Secretariat at

Contact persons:

Raja Syamsul Anwar (;
or Sharmila Devadas (, tel. num.: +603-2698 8044 ext. 8691)

Bank Negara Malaysia's Conference on "The Future Direction of Monetary Policy Frameworks and Strategies in Emerging Market Economies", Sasana Kijang, 21 May 2014