2011 ), redemption or abstinence? original sin, currency mismatches and counter cyclical policies in the new millennium, journal of globalization & development, volume 2 ( 1 ), pages 1 – 35. bis central bankers ’ speeches policies of major central banks drive capital flows and they have become highly volatile since the gfc. finally, the aforementioned improvements in emes are likely to constrain the deterioration in business and consumer expectations. this is also a crucial development as the lessons learned from the past financial turmoils and crises revealed that the most distinguishing feature of an emerging market economy is the significant adverse effects on the real economy through the expectations channel. among many advances in emes, rich policy frameworks have played an important role in improving economic agents ’ confidence in emes. in addition, emes ability and policy conduct to accumulate policy spaces have made significant contributions to solidifying gains in confidence. it is worth noting that in addition to conventional macroeconomic policies emes have also extensively used macro - and micro - prudential policies, serving as buffers for shocks ( figure 8 ). since the em financial crises emes have continued to use a number of macro - prudential measures when conventional policies, such as rate hikes to manage aggregate demand, were realized to be ineffective and / or insufficient. such macro - prudential tools have not only maintained low levels of leverage but also accumulated buffers that can serve as policy spaces in cases of economic downturn. additionally, macro - prudential policy helped monetary authorities implement monetary policy exclusively to achieve price stability. finally, emes learned macro - prudential policy is more appropriate to limit and repair maturity and currency mismatch problems. in addition to the macro - prudential policy, emes implemented rigorously micro - prudential policies rigorously in order to make their financial firms, especially banks, more resilient and safer against financial stresses. the macro and micro prudential policies of emes in the previous decades have succeeded in lowering levels of leverage, not only in financial sectors, but also in nonfinancial and household sectors. this, in turn, lowered levels of maturity and currency mismatches. this gave rise to high capital adequacy ratios and low non - performing loan rations in banking sectors of many emes. moreover, in relative terms fiscal positions of emes have further strengthened while those of aes have worsened in the aftermath of the gfc due to size

as eligible collateral ; 500 billion yen under the special rules for financial institutions ’ small - lot investments and loans ; and 12 billion u. s. dollars – equivalent to 1. 2 trillion yen – under the special rules for a u. s. dollar lending arrangement using the u. s. dollar reserves already held by the bank. recently, with the virtuous cycle of economic activity continuing to operate, there has been a growing impetus among firms to make active investment. i expect that firms will increasingly make use of the accommodative financial conditions and thereby boldly seize new business opportunities. the bank, for its part, will continue to provide firm support that enables them to meet their challenges. bis central bankers ’ speeches