But a not neglible portion of total capital flows, mostly the result of carry-trade type of transactions, is short term and jittery. All these flows have affected the level and volatility of domestic interest rates, credit and exchange rates, both in nominal and real terms, and have made the implementation of monetary policy extremely difficult.
In short, UMP in AE have become an important element that can affect financial stability in EMEs. Some of the flows induced by UMP have been intermediated by local banking systems in EMEs, and some in the bond and equity markets. From a financial stability point of view, the flows of most concern are those intermediated through the banking system and the fixedincome markets.