It may complicate the conduct of monetary policy if money demand and capital flows become unstable as a result of external shocks, as the experiences of the Deutsche Mark and the Swiss franc after the demise of the Bretton Woods system starkly illustrate. The outbreak of the global financial crisis has even added some new dimensions to the debate.
Even though South Africa still maintained a positive net balance on its financial account for the first three quarters of 2008, there were significant net outflows of portfolio investments as global investors were forced to deleverage. In addition, funding in the international markets has become much more expensive.