Capital flows, exchange rates and policy frameworks in emerging Asia

A report by a Working Group established by the Asian Consultative Council of the Bank for International Settlements

Under the direction of the Asian Consultative Council of the BIS at its February 2019 meeting, the BIS Representative Office for Asia and the Pacific set up a Working Group of regional central banks to examine their policy frameworks, focusing on capital flows, exchange rates, and the joint use of monetary, macroprudential, exchange rate and capital flow management policies. The Working Group is made up of members from the central banks and monetary authorities of China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand, as well as observers from the central banks of Australia, Japan and New Zealand.

This report is the summary of the responses to two questionnaires, organised by different elements of policy frameworks. First, a detailed questionnaire provides a stocktake of how central banks model exchange rates and capital flows and incorporate these into their policy frameworks, and how they use various policy instruments to deal with challenges related to capital flows and exchange rates. Second, a short supplementary survey assesses changes in response to the Covid-19 pandemic, a shock that is serving as a severe stress test of policy frameworks in many jurisdictions in the Asia-Pacific region.