If they sterilize the resultant liquidity, they will run the risk of pushing up interest rates which will hurt the growth prospects. Capital flows can also potentially impair financial stability.
How EMEs manage the impossible trinity – the impossibility of having an open capital account, a fixed exchange rate and independent monetary policy – is going to have an impact on their prospects for growth, price stability and financial stability. 9. Globalization is not new; its risks and rewards are also not new.