In the absence of a conceptual framework, EME central banks facing large capital flows have had to experiment with the tools at their disposal – such as foreign exchange intervention, macroprudential policies, and capital flow management measures. There is now a rich body of policy experiences, especially in emerging Asia, crying for a theoretical framework. We need a framework that provides coherence not only across these various policy tools but also with traditional monetary and fiscal policies. There is an active research agenda at the BIS on such an integrated policy framework. As a practitioner of some of these policies, MAS is delighted and honoured to organise this conference together with the BIS. What is the Big Deal with Capital Flows? When central bankers from advanced economies meet, they discuss quantitative easing and r-star (the natural rate of interest). When EME central bankers meet, they talk about capital flows. What’s the big deal with capital flows? First, capital flows to EMEs have become quite large. Annual gross portfolio inflows have grown to an average 1.3% of EMEs’ GDP in the eight years following the global financial crisis, compared to an average 0.7% during the eight years prior. [1] A key driver of the surge in cross-border capital flows has been the prolonged period of nearzero interest rates and highly expansionary monetary policies in the advanced economies. There is empirical evidence that quantitative easing policies in the US have made capital flows to EMEs more procyclical [2] . Second, capital flows have become more volatile.
Speeches  Published Date: 26 May 2021  "The Quest for an Integrated Macro Policy Framework" - Opening Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at Asian Monetary Policy Forum and MAS-BIS Conference on Macro-Financial Stability on 26 May 2021 Mr Agustín Carstens, General Manager, Bank for International Settlements, ladies and gentlemen, good a ernoon and welcome to this year’s special edition of the Asian Monetary Policy Forum featuring the MAS-BIS Conference on Macro-Financial Stability. Macro-Financial Stability: Theory Trying to Catch up with Practice The origins of this conference go back to a conversation that Agustín and I had about 18 months ago on the need to crystallise a coherent policy framework for macro-financial stability. For the three decades preceding the global financial crisis, the traditional inflation targeting framework for monetary policy has served most economies well, delivering price stability as a basis for sustained economic growth. That framework is now coming under strain. Emerging market economies (“EMEs”) faced with large and volatile international flows of capital have had to resort to a variety of policy tools besides traditional monetary policy to achieve both macro-economic and macro-financial stability. The advanced economies faced with rising leverage and growth in financial assets against the backdrop of extremely low interest rates are also looking at macroprudential measures to promote financial stability. Practice has moved ahead of theory.