Financial openness without financial integration creates the space for systemic risk. Financial integration is associated with large and persistent global imbalances. It manifests itself in the form of credit booms. The Integrated management financial system (IMFS) incentivises and exacerbates a pattern of capital flows that eventually create macro-fragility.
Based on this context, this research asks two questions:
- What is the impact of the exchange rate and heterogeneous capital flows on financial stability?
- What is the historical role of capital controls and macroprudential policy?
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