PETALING JAYA: Bank Negara Malaysia (BNM) will continue to introduce new policies to preserve macroeconomic and financial stability, as new risks from external spillovers emerge.
In its latest quarterly bulletin, the central bank said the external spillovers originating from unconventional monetary policies in the advanced economies will continue to affect emerging economies in ways that are both expected and unexpected.
BNM noted that the state of ongoing uncertainties within global policy, economic, political and financial market developments will lead to periods of heightened volatility.
Therefore, it said, it is important for emerging economies to recognise their autonomy in the conduct of policies to address issues that are unique to the domestic environment.
“Policies can no longer be constrained to conventional tenets of policymaking. Instead, new and untested strategies should be considered,” it added.
BNM also noted that much of these external spillovers have made their way into emerging economies due to the financial globalisation that has taken place over the past few decades.
Additionally, it said an increasingly open financial system also has inevitably exposed the country to large cross-border capital flows along with its attendant risks. It added that this became more pronounced following the policies undertaken by the advanced economies in the aftermath of the Global Financial Crisis in 2008.
“With these policy challenges in mind, there is a need for emerging economies to rethink and reinvent their policy approaches,” it said.
The Malaysian central bank said the policymaking environment is fast-changing and is growing more complex, possibly evolving beyond the scope of conventional and established policy thinking and tools.
Therefore, it said, policies also need to be agile and adaptive to the unique domestic circumstances to prevent them from becoming ineffective and irrelevant.
BNM said Malaysia has adopted three principles to guide policymaking, including policy flexibility and pragmatism, policy autonomy, and clear and transparent communication, which have been key in the management of financial market volatility.