Determining which tool is appropriate has been a matter of careful judgement, depending on policymakers’ objectives, country circumstances, available policy space, and the nature of the shock. Policymakers have typically assigned interest rates as an instrument for price stability, MPMs for financial stability, FXIs for exchange rate stability, and CFMs for directly curbing capital inflows and outflows. However, the reality is more complex as policies interact and have overlapping eﬀects. For instance, MPMs working through the credit channel can have a dampening eﬀect on aggregate demand and influence the attainment of monetary policy objectives. Some countries use CFMs to mitigate capital outflows to stabilise exchange rates, if FXIs prove insuﬀicient. An integrated policy framework needs to provide greater clarity on these interactions. We need a deeper understanding of how these instruments can complement, substitute or conflict with one another. For example, we need to better understand the interactions between monetary policy and macroprudential regulation in achieving both price and financial stability. One view is that monetary and macroprudential policies are largely complementary and hence should be used together for better results. For instance, an IMF study found that tighter MPMs to address financial stability risks are associated with more countercyclical monetary policy responses to macroeconomic shocks. [9] An alternative perspective is that monetary policy can be used to achieve both price and financial stability. By setting the price of leverage and influencing risk taking, monetary policy can lean against the build-up of excessive credit and financial imbalances, thus mitigating financial stability risks.
However, and this is a point I have made elsewhere, monetary policy is too blunt an instrument for addressing specific risks to financial stability, and it can sometimes cause collateral damage to the rest of the economy if it tries to do so. [10] An integrated policy framework could perhaps shed light on the circumstances under which monetary policy could also serve financial stability objectives, and whether there are benefits to jointly calibrating monetary policy and macroprudential policy, as well as how this calibration should be done. The BIS and IMF have both been undertaking research on these issues. Central bankers have at the same time gained considerable experience in employing an eclectic mix of policy instruments, with varying degrees of success. There is merit in bringing these practical experiences to bear in formulating an integrated policy framework. Conclusion Developing eﬀective policy instruments and using them in a coherent fashion will enhance macroeconomic and macro-financial stability. It will help to make financial globalisation safer, especially for EMEs, at a time when there are growing risks of fragmentation in international economic relationships. Your task is therefore vital. I wish you a fruitful conference ahead. [1] IMF Balance of Payments, IMF International Financial Statistics, MAS calculations. [2] Fratzscher, M., Lo Duca, M. and Straub, R. (2013), “On the international spillovers of US quantitative  easing”, ECB Working Paper No. 1557; Bhattarai, Chatterjee, and Park (2017), “Global Spillover Eﬀects of US Uncertainty”, Fed Reserve Bank of Dallas, Working Paper No.