Some countries have opted for various forms of capital control, although their effectiveness needs to be evaluated based on the objective of imposing them at the first place. Some studies find that capital controls have some compositional effect and could alter the maturity of new investments. So far as reducing the volume of flows, the empirical evidence is inconclusive. Unless the authorities have full control over capital accounts, partial restrictions are unlikely to offset the impact of flows, prevent appreciation of local currency and provide more space for independent monetary policy. In principle, flow of capital from advance economies to emerging ones and appreciation of the currencies of the latter over time is a mutually beneficial secular trend, as long as it is supported by strong fundamentals, better growth prospects, and high productivity differentials. Rather than fighting against this trend through over restrictive capital controls or excessive reserve accumulation, there is strong legitimacy in using macro-prudential policies to mitigate the adverse effects of volatility in capital flows, especially those with speculative nature, over financial stability. Several emerging economies have started implementing such measures to limit the credit growth and asset price bubbles. These measures include raising reserve requirement ratios, requiring higher income- and deposit-to-loan ratios, tightening capital adequacy requirements and liquidity ratios, introducing transaction taxes, fees etc.
Conclusion The recent crisis put front and center the rising economic power of emerging countries. It has also demonstrated the vulnerabilities within the global system, especially across financial markets. Financial stability becomes a major concern for policy makers, which has the potential to reshape the monetary policy framework of central banks. Significant steps have been undertaken, but significant progress is still needed to tackle global imbalances. That involves not only revisiting economic policies, but also economic and institutional infrastructure that shapes them. As the quest for a new global order continues both in theoretical and practical levels; the predictability, balance and sustainability of the new global order will depend on the cooperative and coordinated efforts to establish a well-represented infrastructure. Thank you for your attention. BIS central bankers’ speeches  5