The ongoing global financial turmoil has revived the question of whether central bankers ought to tighten monetary policy pre-emptively in order to head off asset price misalignments before a sudden crash triggers financial instability. This study explores the issue of the appropriate monetary...

The resurgence of private capital inflows into Asia in recent years has raised the question of whether the region is susceptible to yet another financial crisis. While a sudden large-scale reversal of capital flows is not likely to result in a liquidity crunch or balance of payments crisis, the...