BIS economist Shin Hyun-song named Bank of Korea governor
The logo of the Bank of Korea is seen in Seoul, South Korea, on Nov 30, 2017. (Photo: REUTERS/Kim Hong-Ji)
SEOUL: South Korean economist Shin Hyun-song, best known for predicting the 2008 Global Financial Crisis, was named on Sunday (Mar 22) to head the central bank, signalling a shift toward a distinctly hawkish monetary policy.
President Lee Jae Myung chose Shin, head of the economic department at the Bank for International Settlements (BIS), dubbed the central bank for the world's central banks, to replace Bank of Korea Governor Rhee Chang-yong when his term ends on April 20.
"As seen in the recent Middle East situation, domestic and global economic conditions are not separate from each other, which will make his expertise stand out even more," a spokesperson at the presidential Blue House told a briefing on Sunday.
Shin, who is best known for predicting the 2008 Global Financial Crisis and has an academic reputation defined by his consistent alarms against excessive leveraging, faces immediate challenges from Middle East-driven inflation and uneven growth. Shin would be taking over the top central bank job at a time when policymakers face a delicate balancing act between supporting growth and containing financial stability risks stemming from surging household debt and the Iran war.
Although high-tech sectors including the semiconductor industry are thriving, recovery remains uneven as traditional sectors such as steel and petrochemicals struggle due to weak external demand. The BOK in February left its benchmark interest rate unchanged at 2.50 per cent, and signalled it is likely to keep rates steady until at least August this year.
Shin and the BIS declined to comment.
Many of his remarks made during interviews were also about the need for major policy efforts to deleverage amid surging household debt, to avoid the kind of financial crisis the country has seen in the past and also to curb red-hot property prices surrounding Seoul.
"He can be seen more as a hawk than a dove, that's a broad understanding among economists largely because many of his papers have been focusing on the dangers of over-leveraging," an official who worked with Shin at the BIS said.
One former colleague of Shin described him as "Messi if we are talking about soccer".
"I don't think anybody in academia will dispute that he is arguably one of the most accomplished economists from South Korea. Has humble character, my experience when I visited the BIS was all positive as he arranged so many networking events for visiting Korean officials," said a finance ministry official.
Shin, 66, faces a confirmation hearing in the National Assembly, but lawmakers do not have a veto over the president's nomination. "If it's a supply shock, and certainly if it's a temporary one, these are the textbook examples where you should look through and not react with monetary policy," Shin said in a report last week. "It really depends on how long the conflict lasts and how long the rise in the oil price will be sustained."
Shin and Raghuram Rajan presented warnings at a US Federal Reserve conference in August 2005, drawing a metaphor from the London Millennium Bridge to identify systemic vulnerabilities that would eventually trigger the global financial crisis.
Shin, a former Princeton University professor, is known to have close ties with many BOK officials including Rhee, having been a regular panelist at the bank's symposiums.
The governor can be reappointed for a four-year term once.
