ABSTRACT
East Asian monetary policy frameworks have evolved substantially over the past two decades, chiefl y in response to shocks from the Asian fi nancial crisis of 1997-1998 and the global fi nancial crisis of 2007-2009. The Asian fi nancial crisis showed the importance of exchange rate fl exibility and credible policy frameworks, leading to increased central bank independence, greater focus on infl ation policy, and more fl exible exchange rates. A key lesson of the 2007-2009 global fi nancial crisis was the importance of containing systemic fi nancial risk and the need for a “macroprudential” approach to surveillance and regulation that can identify system-wide risks and take appropriate actions to maintain fi nancial stability. Emerging economies face particular challenges because of their underdeveloped fi nancial systems and vulnerability to volatile international capital fl ows, especially sudden stops or reversals of capital infl ows.
