VOX  CEPR Policy Portal

The Global Crisis originated in developed economies but was also a large shock to emerging market economies. Based on this event, this column argues that emerging market central banks should take into account domestic and external financial variables such as bank credit, asset prices, credit spreads, the US interest rate and the real exchange rate, not just effects on inflation and real economic activity. A stronger anti-inflationary stance is needed when monetary policy aims to maintain financial stability.