Vickery, James and Joshua Wright (2013). “TBA Trading and Liquidity in the Agency MBS Market.” Federal Reserve Bank of New York Economic Policy Review, Forthcoming. Wright, Jonathan H. (2012). “What Does Monetary Policy Do to Long-Term Interest Rates at the Zero Lower Bound?” NBER Working Paper Series 17154. Cambridge, Mass. : National Bureau of Economic Research, June. 6  BIS central bankers’ speeches
1/3  BIS central bankers' speeches  While capital flow risks have become more complicated, the issue faced by policymakers remains unchanged – that is, how can we better manage these risks and yet maximise the benefits that come with capital flows. The experience of our economies in dealing with capital flow volatility underscores the need to ensure our economic fundamentals are robust. While this is necessary, it is not sufficient. We have seen how external developments that are beyond our control, such as Taper Tantrum and trade tensions, could trigger periods of sharp capital flow volatility in emerging economies with severe consequences. There are “innocent bystanders” who are gravely impacted. It is therefore imperative that collectively, we continue to urge the global community to better manage the risks arising from financial openness. More needs to be done at the international level to have, to quote IMF MD Christine Lagarde, “safer capital flows". Nevertheless, we have to recognise that it is not easy to expect change at the international level. It will definitely take time. While the global community continues to debate and explore possible solutions to manage spillovers and spillbacks of policies in advanced economies, our economies will have to continue to grapple with capital flow volatility and its consequences on financial and macroeconomic stability. Therefore, I strongly believe that emerging economies must have the necessary domestic policy space in dealing with capital flows.