An integrated policy framework analysis found that for emerging economies without anchored inflation expectations and shallow foreign exchange markets, a combination of monetary policy and foreign exchange intervention was effective for economic stabilization. Recently, major international organizations like the IMF, BIS, and OECD have shifted towards allowing some foreign exchange intervention and capital flow management measures to reduce exchange rate and capital flow volatility and achieve financial stability. Since there is a general consensus that Korea does not have a deep foreign exchange market, an appropriate combination of monetary policy, foreign exchange intervention, and capital flow management measures can help reduce exchange rate volatility. As Korea's foreign exchange market advances and if Korea succeeds to join major global bond indices, its sensitivity to external factors may increase, so measures to assess the depth and maturity of Korea's foreign exchange and financial markets are needed to determine the optimal policy mix.