Brazil is not alone in trying to discourage hot money inflows. Reuters quotes a Monetary Authority of Singapore official as saying that authorities are watching the growth of asset prices. Monetary policy is a blunt instrument, and should not be used against asset prices, he said, saying they have other macro-prudential tools to use.
If Singapore and other emerging markets were to follow Brazil’s lead and set up barriers to inflows, the market could sour on emerging markets as investment destinations. Presumably this would underpin the dollar and other mature markets, to some extent.
