IMF paper tracks Asian authorities’ responses to volatile capital flows
Monetary policy typically responds to several variables in pursuit of greater stability, analysis finds
Asian emerging market economies (EMEs) have deployed a wide range of tools to insulate themselves against volatile capital flows, with monetary policy particularly stretched, analysis by the International Monetary Fund finds.
Reflecting a growing recognition of the destabilising impact of capital movements, the IMF team finds a floating exchange rate can, “under certain circumstances”, amplify shocks rather than absorbing them. Exchange rate depreciation can “aggravate” firms’ vulnerabilities
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