1945

Central bank strategies to boost investor confidence in an era of volatility, rapid economic transformation, and uncertainty

Macroeconomic stability and financial stability are the key preconditions for building investor confidence. All investors, portfolio and direct alike, invest in those countries that can guarantee a certain level of policy predictability and whose economies are largely resilient to shocks. Meeting these two conditions reduces the macroeconomic risks for projects, allowing a country to attract more long-term investments as well as investors from the complex sectors of the economy. On the other hand, portfolio investments themselves can be a source of volatility. Therefore, in order to guarantee price and financial stability, central banks should have a consistent and predictable monetary policy framework in place that includes a range of financial stability instruments and can manage risks to both domestic and reserve currency liquidity.

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