Monetary policies of financial centre countries could have large spillover effects on smaller economies. This column argues that the strength of the links with the centre economies has been the major factor affecting financial conditions in emerging and developing countries. Open macro policies such as the exchange rate regime and financial openness are also important. An economy that pursues greater exchange rate stability and financial openness has a stronger link with the centre economies.
Joshua Aizenman, Menzie Chinn, Hiro Ito, 09 July 2015
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