August 2, 2017
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Exchange rates board, Australian Securities Exchange: Emerging economies have several tools to manage capital flows. The most common are foreign exchange intervention and monetary policy (photo: wx-bradwang/iStock by Getty Images)
The global financial crisis and its aftermath saw boom-bust cycles in capital flows of unprecedented magnitude. Traditionally, emerging market economies were counselled not to impede capital flows. In recent years, however, there has been growing recognition that emerging market economies may benefit from more proactive management to avoid crisis when flows eventually recede. But do they adopt such a proactive approach in practice?