Uncertainty grows over fallout from advanced economies' QE: BOK head

BUSAN, July 29 (Yonhap) -- South Korea's top central banker said Monday the global economy faces growing uncertainty over the fallout from advanced economies' unconventional monetary policy.

Advanced economies, led by the U.S., have adopted an unorthodox monetary policy dubbed quantitative easing (QE) in a bid to prop up their economies in the wake of the 2008 global financial crisis.

Ample liquidity unleashed by such accommodative policy has been flowing into emerging markets, raising risks of asset bubbles and appreciating recipients' currencies. But emerging countries are now concerned about a possible sudden reversal of the capital inflows.

"(Such policy) helped the global economy recover, but uncertainty over the fallout from this policy has also increased," Bank of Korea (BOK) Gov. Kim Choong-soo said in a speech to celebrate the construction of a new building of the central bank's regional unit in the southern port city of Busan.

The governor said that Korea cannot help but respond to changes in external conditions sensitively as exports account for more than 50 percent of the local economy.

South Korean economy grew 1.1 percent on-quarter in the second quarter, the fastest expansion in more than two years, on the back of fiscal spending and improved construction investment.

Kim said Friday that the second-quarter growth was mainly driven by external factors although fiscal and monetary stimulus played a role in propping up the growth, indicating that domestic demand still remains weak.

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