Policy autonomy It is now widely accepted that a broad policy toolkit and pragmatic policymaking are paramount in dealing with multiple challenges. Unconventional and unprecedented policies are no more heresy. This shift in mindset is a very welcome change. If only this mindset had persisted during the AFC, our experience in the region would have been much more positive. Experience also suggests that policy autonomy is critical in deploying measures in an environment with no precedent. Especially when the essence of the problems is domestic in nature, compounded by the specificity of each economy’s operating and legal environment, political and social structures. 3/5  BIS central bankers' speeches  Policy prescriptions will be least effective when it is not ‘owned’ by the domestic policy maker or when it is not independent of external influence and coercion or when policy being administered is more a reflection of ‘consensus economic’ thinking. External influence can be viewed from two aspects. External developments that transcend national boundaries; and external players that may directly or indirectly suppress domestic autonomy. The former has been greatly discussed, where financial liberalisation and globalisation have worsened the trade-offs for monetary policy to achieve its multiple domestic objectives. Some consensus has also been reached on the ways to regain autonomy, in the form of broad policy toolkit to prevent overburdening of any single policy instrument, the buildingup of buffers and instituting the necessary structural reforms that serve to fortify the economy.

Domestic policymakers have greater understanding of the local economic and financial conditions, with the necessary experience in dealing with countryspecific circumstances. In this regard, multilateral institutions must respect that individual countries, as independent institutions, have made the tough but necessary choices after careful and deliberate considerations. Multilateral institutions possess great breadth of cross-country information to dispense prescription for its member countries. But there is no such thing as a ‘one-pill-cures-all’ remedy. Instead, tailored policy responses are essential given the unique and diverse nature of emerging economies. As the world becomes increasingly more integrated and harmonised, we welcome the value of global coordination and interaction if it adds to the betterment of society at large. But where peculiarities exist, member institutions ought to be given the space to exercise their autonomy. We must also avoid the rush towards greater cross-country standardisation that impinge on policy flexibility or where policies are judged based on pre-subscribed narrow definitions, theories and concepts rather than the actual outcomes. The never-ending debate on the categorisation of policies as capital flow management measures or macro prudential policies is one such contention. In an increasingly integrated and complex environment, the impact of shocks varies between countries. The policy would also vary. Even if policies are similar, the outcomes might be different. The work of multilateral institutions becomes even more difficult and complex. For instance, any mis-categorisation of policy could prematurely reverse the effectiveness of that policy, given the impact it might have on investor perception and sentiment.