While there is an advantage in developing the financial sector with appropriate selfcorrecting mechanisms, it is not possible to achieve this in the short term, and is particularly difficult to achieve during highly uncertain global economic conditions.
Hence, the extent of or lack of self-correcting mechanisms in an economy should be treated as given, in the short term, and a suitable policy of intervention has to be pursued accordingly. Thirdly, the real sector flexibilities may be far less in EMEs. For example, opening a business or closing a business in India requires a considerable amount of time.