How should prudential and monetary policies in open economies react to "current global conditions"?

Intervention by Mr Luiz Awazu Pereira da Silva, Deputy General Manager of the BIS, at the BoE-HKMA-IMF Joint Conference on "Monetary, Financial and Prudential Policy Interaction in the Post-Crisis World", Hong Kong, 24-25 October 2016.

In a global environment characterised by the implementation and the consequences of unconventional monetary policies (ultra-low rates, exchange rate volatility, large capital flows, etc), how should policy frameworks of small open and emerging market economies react? How should those economies lean against the wind and with what instruments? Apart from monetary policy, what combination of macroprudential tools should this include? We illustrate the results of leaning against the wind with a combination of macroprudential and monetary policies that complement each other and help to achieve both price and financial stability. More specifically, calling this an integrated inflation targeting (IIT) framework, we show the need to coordinate and jointly calibrate both instruments. Nevertheless, we acknowledge that there is a need to continue to explore a research agenda on how, when and with what combination of complementary tools we can best lean against the wind.