If the external shocks seemed to pose financial stability risks, macroprudential measures might be introduced as a complement or backstop to existing regulations and oversight of domestic financial systems. However, they should be used judiciously by targeting financial vulnerability itself, and not as a pretext for more protectionist and, ultimately, welfare-eroding measures.
The temptation to impose additional capital controls, engage in persistent and large-scale exchange rate intervention and otherwise inhibit necessary adjustments in relative prices should be resisted. Some countries that dislike the spillover effects associated with the monetary policies of AEs are also unhappy with the options that they have for managing them. Many of these countries favour fixed exchange rate arrangements.