Capital flows, exchange rates and financial conditions in EMEs in an evolving international monetary system
Papers in this volume were prepared for a meeting of emerging market economy Deputy Governors organised by the Bank for International Settlements on 12–13 March 2026.
Emerging market economies (EMEs) have navigated a rapidly evolving global financial landscape shaped by structural changes in capital flow and exchange rate dynamics as well as global financial conditions. Since the Great Financial Crisis, EMEs have witnessed a shift in the composition of capital flows, with the increasing importance of residents' outflows and local currency financing and the growing role of non-bank financial institutions in both gross portfolio capital inflows and outflows. These trends, coupled with the increasing intraregional financial integration among EMEs, underscore the need for resilient and adaptive policy frameworks for EMEs. The 2026 EME Deputy Governors Meeting held in Basel on 12–13 March 2026 provided a platform for central banks to discuss these developments and their implications. The discussions highlighted how EMEs have leveraged diverse policy toolkits, including financial condition indices, foreign exchange interventions and macroprudential measures, to maintain external stability and foster sustainable growth in an increasingly uncertain global environment.
The papers in this volume reflect the key themes discussed at the meeting, exploring the intersection of global and domestic factors shaping EMEs' financial conditions. They examine the evolving dynamics of capital flows and exchange rates, the role of local and foreign investors and the transmission of global financial shocks to EMEs. The volume also sheds light on the innovative approaches adopted by central banks to manage exchange rate pressures, address procyclical investor behaviours and enhance market infrastructure. By sharing the insights and experiences in these contributions, we aim to deepen the understanding of how EMEs can address the challenges of an increasingly interconnected and complex international monetary system in the future.