Monetary policy in advanced economies, implemented through very low interest rates and large-scale asset purchases, has led to concerns in emerging markets about a surge in global liquidity. The main worry is that monetary ease in the major currencies could amplify capital flows into emerging market economies when risk is “on” and capital outflows when risk is “off”. Concerns arise about the risk that capital inflows might ease monetary conditions or that outflows might destabilise the financial system. International credit thus raises both monetary and financial stability issues
