Global events are significant, but there is still lots of scope for local policymakers across the world to pursue their own objectives, such as full employment or low inflation, Selim Ali Elekdag and Gaston Gelos write for the IMF Blog. They cite the latest IMF Global Financial Stability Report’s indexes, which showed “that global events account for between 20 percent and 40 percent of local conditions across countries, leaving policymakers considerable scope for action. And even as financial markets have become more integrated, the degree of control countries exert over domestic conditions has only diminished mildly over the past two decades. Still, the rapid speed and the strength by which external financial shocks tend to affect local markets often makes it difficult for policymakers to react in a timely and effective manner.” Conditions globally are, as expected, driven strongly by the United States, the report suggests. Closer to home, Elekdag and Gelos say “emerging markets, which are more sensitive to global conditions than advanced economies, should take steps to bolster their resilience to global shocks. They should deepen domestic financial markets and develop a local investor base, making their markets less susceptible to fluctuations in flows of money across borders. Such steps are particularly important now, when financial conditions are tightening in response to the Fed’s rate hike.”