It is not possible to know the degree to which this consideration has influenced monetary policy in emerging economies, although some studies suggest that it could be significant.9 Aside from the issue of frequency, this approach can put at risk the anchoring of inflation expectations and compromise control over future inflation.
Additionally, the likelihood of financial instability can increase if many central banks react in the same way. Another option in the same group is to enforce explicit capital controls, including restrictions on portfolio investment and short-term debt. Some emerging economies have used these measures with various degrees of intensity, but, in general, on a temporary basis since they have noteworthy limitations.