Caught in the Crosswinds: The Experiences of Selected Economies Responding to External Volatility with Multiple Policy Levers
23 Pages Posted: 5 Jan 2021
Date Written: November 2020
A case study approach is used to assess the multi-pronged policy response of seven small financially open economies with flexible exchange rate regimes to external shocks following the global financial crisis. FX intervention was frequently used- including during outflow episodes to prevent disorderly depreciation and preserve financial stability. Monetary policy often considered both financial and external stability. Capital flow management measures were sometimes calibrated symmetrically over the cycle while macroprudential measures were mostly deployed during inflow episodes. Assessment of the macroeconomic conditions paints an inconclusive picture on the benefits or costs of such policies, suggesting the need for further analysis.
JEL Classification: F21, F32, E52, G28, E31, F31, G18, E22, E43
Suggested Citation: Suggested Citation