Bang Gi-seon, Deputy Minister of Economy and Finance, "Steep Monetary Tightening, a Risk Factor for Global Economic Instability"

'G20 Global Financial Stability Conference' Held
"Steep Monetary Tightening Raises Recession Concerns and Increases Economic Agents' Hardship"

Bang Gi-seon, First Vice Minister of the Ministry of Economy and Finance, is presiding over the Emergency Economic Vice Ministers' Meeting held on the 16th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Sejong=Reporter Kwon Haeyoung] Bang Giseon, First Vice Minister of the Ministry of Economy and Finance, stated on the 21st that "steep monetary tightening exacerbates concerns about economic recession and increases the pain of economic agents."

Vice Minister Bang made this remark while attending the 'G20 Global Financial Stability Conference' held by the Ministry of Economy and Finance and the Korea Development Institute (KDI) at the Seoul Plaza Hotel, emphasizing the need for the role of the Group of Twenty (G20) in ensuring global financial stability.

Vice Minister Bang diagnosed, "The current instability in the global financial market stems from shocks in the real economy such as supply chain disruptions caused by the pandemic, restructuring of supply chains due to global economic bloc formation, and sharp rises in commodity prices triggered by geopolitical risks like war." He added, "The financial market instability originating from the real sector can at any time again burden the real economy, leading to a vicious cycle," emphasizing, "Now is a time when intergovernmental policy coordination for global financial stability is more necessary than ever."

He said, "In the past, the G20 proved its raison d'?tre by providing pivotal leadership during the unprecedented global financial crisis that was difficult to resolve by individual countries alone," and added, "It is time for the G20 to once again demonstrate its raison d'?tre through actions, not words."

Along with the government's strengthened monitoring to respond to uncertainties, efforts to create a financial environment aligned with global standards, such as tax exemption on foreign investment in government bonds and inclusion in the World Government Bond Index (WGBI), were also introduced.

Maurice Obstfeld, professor at UC Berkeley, who delivered the keynote speech, also emphasized monetary policy cooperation among countries at this point where an inflation era similar to the 1980s has reemerged. Professor Obstfeld forecasted that the negative ripple effects of the US monetary tightening to combat inflation this year and the resulting rise in the dollar's value on the global economy will be greater than in the 1980s, warning that countries could fall into a 'prisoner's dilemma' situation where they competitively appreciate their currencies and export inflation.

Kim Soyoung, Vice Chairman of the Financial Services Commission, also stressed in her congratulatory remarks the need for G20-centered international cooperation to examine the ripple effects of global tightening, strengthen the international financial system, and address the impact and response directions regarding digital assets.

Participants explored the acceleration of monetary tightening by major countries, global economic risk factors, and response measures through sessions.

Now in its eighth year, the G20 Global Financial Stability Conference is a forum where policymakers from G20 member countries and scholars in the fields of economics and finance gather to diagnose risk factors in the global economy and international financial markets and seek response measures. This conference was held under the theme "Recent Risk Factors in International Financial Markets and the Future of the International Financial System."

The government plans to review the policy recommendations discussed at this meeting and utilize them at the G20 Finance Ministers' Meeting in October and the G20 Summit in November. Policy recommendations will also be concretized mainly through the G20 International Financial Architecture Working Group (IFA WG), co-chaired by France and Korea.