POST-CRISIS ENVIRONMENT IN 5-YEAR TIME FRAME

       The following article entitled "Challenges in the New Global Macroeconomic and Financial Environment" is presented by Don Nakornthab, Jittapa Prachuabmoh, Tientip Subhanij, and Kessarin Tansuwanarat from the Bank of Thailand.

       The current global financial crisis has dramatically changed the future economic landscape as well as the agenda of central banks and fiscal fiscal authorities around the world.
       Thinking that the good times will return once the crisis dust settles would be a fatal mistake for businesses and policy-makers alike. A good understanding of what lies ahead will be critical to the development of future strategies at both corporate and country levels.
       In this paper, we attempt to provide an educated estimation of how the postcrisis macroeconomic and financial environment will look in a fiveyear timeframe along with the risks and challenges for emerging market economies.
       Among the still unfolding developments that we attempt to portray are the remaining global imbalances and advanced economies' central bank balance sheets and public debt.
       In so doing, we briefly review the fallout of the current crisis and the responses by both the public and the private sectors as a backdrop for what will come next. The former includes the global recession, fragile banking systems, dysfunctional credit markets, occasional financial market jitters, and asset-price deflation.
       The latter includes aggressive monetary easing, unconventional monetary policies, financial system stabilisation and reform, and massive fiscal stimulus by the public sector, risk repricing, deleveraging, and balance sheet repairs by the private sector, as well as the role of the IMF.
       To keep our analysis focused, we picked four aspects of the postcrisis environment we deem to have the greatest implications for emerging market economies' macroeconomic and financialsector policies.
       These are global economic growth, global inflation, the future for the US dollar, and capital costs. The paper concludes with policy challenges for emerging market economies from exportled growth, fiscal dominance, monetary policy communications, foreignexchange reserve accumulation policy and the development of financial markets.
       This article is a portion of the research paper to be presented at the forthcoming annual economic symposium organised by the Bank of Thailand on the 15th and 16th of September at the Centara Grand Hotel. The views expressed in this paper are the authors' own and are not necessarily endorsed by the Bank of Thailand.