And many of these estimates demand a judgment about the path of non-monetary policy factors that will almost assuredly change over time. Moreover, policymakers need to grapple with uncertainty from error in real-time estimates of real gross domestic product and estimates of potential output.
The Mexico crisis and that still open in South-East Asia, like the debt crisis of the early 1980s in Latin America, have shown that a large inflow of funds can temporarily prop up unsustainable economic conditions. Anchoring the national currency to strong currencies when economic policies are inadequate causes the real exchange rate to rise, creating the conditions for a crisis.