However, with the deepening of globalisation, the simple sum of each country’s policy action may not necessarily achieve an optimal outcome at the global level. Policymakers in both advanced and emerging economies need to rethink the meaning of domestic stability. The direct impact of policy measures on the domestic economy does not provide a comprehensive view.
It has become ever more important to review the spillover effects of their policies across borders which will also reverberate back to each country through economic and financial interlinkages. When considering possible financial imbalances stemming from large capital inflows or inflexible exchange rate regimes, there are no easy solutions which would satisfy each and every country’s needs both from an economic and political standpoint.