For decades, Shin Hyun-song advised the world’s most powerful central bankers on how to curb financial risks, curb inflation and keep economies stable.
The South Korean economist, previously at the Bank for International Settlements, known as the central bank for central banks, is now taking over at the Bank of Korea in his home country at a precarious time.
The won tumbled last month to its lowest level against the dollar since 2008, while South Korea’s dependence on energy imports has exposed its vulnerability to a supply shock like the Iran war. Tensions with the US, Seoul’s top trade and security partner, have also heightened concerns about economic stability.
These challenges will test a figure seen by colleagues as one of the most important central bank economists of his generation, but who spent much of his career in academia before moving into policymaking.
“Shin’s influence in academic economics and in the field of central banking really cannot be overstated,” said Jesse Schreger, associate professor of macroeconomics at Columbia Business School. “When it comes to addressing the challenges at the Bank of Korea, I can’t think of anyone I would rather lead during a period of economic and financial turmoil.”
Despite the boom in AI-driven demand for memory chips, South Korea’s export-driven domestic economy is struggling with sluggish growth and renewed inflationary pressures, while households struggle with heavy debt and high real estate prices in the capital region. The BoK has kept interest rates at 2.5 percent for the past seven meetings.
Shin has signaled little willingness early on to change the direction of monetary policy. In his inaugural speech as BoK governor this week, he called for a “prudent and flexible” approach, noting that “uncertainty over the path of inflation and growth has increased due to a supply shock caused by the war in the Middle East.”
Lee Byungtae, a professor at the Korea Advanced Institute of Science and Technology’s College of Business, said Shin’s initial focus would be on “just maintaining the status quo.” Given the war in Iran, it will be “difficult to take hasty steps,” he added.
The BoK said Shin was unavailable for comment.
Shin also pledged on Tuesday to prioritize the internationalization of the won – a priority for foreign investors – and accelerate the central bank’s digital currency program.
He described the push for internationalization as “an important task to establish a currency infrastructure commensurate with the status of our economy,” arguing that broader global use of the won would support capital flows and trade and strengthen financial resilience.
This could also contribute to the MSCI’s reclassification of South Korea as a developed market, some economists said.
Shin has also indicated that he will expand the BoK’s supervision of non-banking institutions, off-balance sheet risks and more complex financial instruments, areas traditionally supervised by other regulators.
“He could pay relatively more attention to financial stability [rather than price stability] compared to other governors,” said Kim Jinill, an economics professor at Korea University.
Like his predecessor Rhee Chang-yong, who devoted BoK research resources to issues such as household debt, inequality, high real estate prices and demographic decline, Shin said structural factors “are not a separate domain of monetary policy, but are an integral part of the way monetary policy is conducted.”
Shin, 67, studied economics at Oxford University in Britain and received his doctorate there under Nobel laureate James Mirrlees. Influential works include a 1998 paper with Stephen Morris on currency attacks, a 2008 paper with Tobias Adrian on financial intermediaries, stability and monetary policy that was presented in Jackson Hole and a paper showing how excessive lending by European banks was a major driver of the 2008 global financial crisis.
“He has a unique ability to boil down the most important questions of the day to their essence in a way that then provides a roadmap for academia and a guide for policymakers,” said Schreger.
In 2009, he served as chief advisor to South Korean President Lee Myung-bak, regulating risks to banks and companies in the aftermath of the global financial crisis.
At the BIS, which Shin joined as head of research in 2014, he helped shape the post-financial crisis debate on capital flows, leverage cycles and systemic risk and developed the macroprudential framework now widely used by central banks.
“Hyun’s work at the BIS on financial flows has been extremely important – particularly in highlighting the central role that swaps play in connecting modern global financial centers and in cross-border financing,” said Brad Setser, senior fellow at the Council on Foreign Relations.
“A lot of what professional economists do is develop an elegant model,” says Klein. Shin’s work, he added, “actually mapping and counting things, was something that people had not yet done in global banking networks or global value chains.”
Additional reporting by Sam Fleming in London
