This Occasional Paper analyses how significant expansions in central banks' mandates, roles and instruments can result in challenges to the independence of monetary policy. The paper reviews, in particular, some of the key challenges to central bank independence brought about by the global...

The Korean monetary authorities have implemented several policies on inflation, foreign exchanges and capital flows during and after the global financial crisis. The inflation target has been missed during the global financial crisis, as the Bank of Korea (BOK) was more lenient to supply...

We review the large literature on various economic policies that could help developing economies effectively manage the process of financial globalization. Our central findings indicate that policies promoting financial sector development, institutional quality, and trade openness appear to help...

From the dawn of civilization, the ever-growing sophistication of human society, division of labour, specialization, and comparative advantage rendered trade an indispensable part of any human enterprise. The need for trade begets the need for finance, and as trade becomes globally...

When do flexible exchange rates prevent monetary and financial conditions from spilling over across currencies? We examine a model in which international investors strategically supply capital to a small inflation-targeting economy with flexible exchange rates. For some combination of...

We show that macroprudential regulation can considerably dampen the impact of globalfinancial shocks on emerging markets. More specifically, a tighter level of regulation reducesthe sensitivity of GDP growth to VIX movements and capital flow shocks. A broad set ofmacroprudential tools contribute...

The size of gross external portfolio holdings has among many countries increased substantially over the recent past. Over the same period the volatility of inflation has declined in most countries. Many previous papers argue that financial globalisation has led to improved policy-making and...

Our friend and colleague Rüdiger Dornbusch passed away before he was able tocomplete his book based on the Munich Lectures in Economics that he gave inNovember 17, 1998, at the Center for Economic Studies of Ludwig-Maximilians-Universität.The lectures contain a fascinating overview of the...

This paper analyzes the impact of large-scale, unconventional asset purchases by advanced country central banks on emerging market economies (EMEs) during 2008–2014. I show that there was substantial heterogeneity in the way EME currency, equity, and long-term sovereign bond markets were...