As the emerging market sell-off in 2018 or the 2013 taper tantrum tells us, capital flows to EMEs are vulnerable to advanced economy central bank policy movements, particularly by the US FED. Therefore, now is the time for EMEs to further strengthen their monetary policy frameworks – and build on their hard-won monetary policy independence.
International institutions, such as the IMF, are there to assist countries through programmes or capacity- development. IMF programmes for emerging markets often stress the need to safeguard central bank independence and strengthen monetary policy frameworks, which can substantially support EMEs under stress. Moving forward, we can see the contours of what needs to be done to prepare for the postpandemic economy.