The best contribution monetary policy can make to the euro area economy is to ensure price stability over the medium term. This means ensuring inflation expectations remain well anchored and that demand conditions are consistent with our target.
In assisting countries to deal with the unintended consequences of these excessive capital flows in a manner that promotes sound policies and strong frameworks – including monetary policy and exchange rate flexibility – as the first line of defence against excessive capital flows, the IMF published a guidance paper titled “The liberalization and management of capital flows: An institutional view 5”.