We examine whether macroprudential policies and capital controls can enhance financial stability in the face
of the risks typically associated with large capital inflows. We construct new indices of foreign currency (FX)-
related prudential measures, domestic prudential measures, and financial-sector specific capital controls for
51 emerging market economies over the period 1995–2008. Our results indicate that both capital controls
and FX-related prudential measures are associated with a lower proportion of FX lending in total domestic
bank credit, and with a lower proportion of portfolio debt in total external liabilities. Other prudential policies
appear to help restrain the intensity of aggregate credit booms. Experience from the global financial crisis
suggests that prudential and capital control policies in place during the boom enhanced economic resilience
during the bust.