Many changes have been underway since the original draft of this book was sent to the press, and, surprisingly, most of them are showing a deglobalization bias. After the GFC, monetary policy maintained an undisputed role among developed central bankers, although sometimes this setting became disputed by monetary authorities at EMEs as QE was flooding them with capital flows. How should small economies (EMEs) cope with the significant spillovers arising from the QE? But before academics and practitioners agreed on a common answer, a new challenge arrived: the taper tantrum episode in 2013 came to demonstrate, once again, how volatile capital flows could become.

At present, and despite the expansion observed among the most important economies, some risks are still underway and could threaten the sustainability of this trend in the medium term. In particular, we should look for a rise in financial stress as financial cycles mature due to the rise in protectionism. The free flow of capital across borders and currencies exacerbates the build- up of risks. Financial risks, however, can also be endogenously induced, as the Chinese debt- spiral boom seems to suggest. Thus, for EMEs qualifying as commodity exporter countries, the massive arrival of capital flows can lead to an exchange rate appreciation bias. The protectionist surge adds more uncertainty, and, therefore, sudden stops are more likely.

Policymakers as well as economists are no doubt well aware of the questions posed by these huge challenges. Many were always looking beyond commercial benefits and recognizing the formidable costs globalization has impose on civil societies. This has led to some of them to publicly admit the convenience of managing capital flows or even the importance of maintaining a competitive exchange rate for economic development. Messages like this are now being sorted out through the IMF working papers series – both backing the SCRER and supporting capital controls. Other comments, as a renewed defence of the Washington Consensus trying to return to the simplest monetary frameworks, would certainly be inappropriate. Traditional or narrow inflationtargeting schemes are ill- suited; therefore, more complex issues should be taken into account if central bankers want to maintain their legitimacy. EME policymakers should be concerned not only about inflation but also financial stability and competitiveness issues (an SCRER). In short, this calls for the management of capital flows as well as for the idea of a managed exchange rate scheme.