But here lies a dilemma: although globalisation has increased the need for stronger and better domestic policies, it has also progressively reduced the range and effectiveness of policy tools available to individual countries to respond to the challenges it creates. For instance, globalisation makes it harder for policymakers to regulate and supervise financial markets and prevent recurrent crises.
As in other emerging markets, a major transmission mechanism of imported monetary easing has been substantial capital flows into the country, driven by the search for yield in equity and fixed income assets. Especially significant have been flows directed to peso-denominated government bonds. Mexico has been attracting an increasing proportion of total capital inflows devoted to emerging-market local bonds.