For emerging economies facing volatile surges of capital flows, consideration needs to go even beyond to a broad range of scenarios relating to potential drains on reserves, including a sudden stop of new financing, withdrawal of foreign portfolio investments, capital flight, and current account vulnerabilities.
[7]  See Gopinath G, E Boz, C Casas, F Díez, P Gourinchas and M Plagborg-Møller (2020), ‘Dominant Currency Paradigm’, American Economic Review, 110(3), pp 677–719. [8]  For a broader discussion of exchange rate pass-through in emerging market economies, see BIS (2019), Annual Report, June, ‘Ch II – Monetary Policy Frameworks in EMEs: Inflation Targeting, the Exchange Rate and Financial Stability’.