Emerging market nations can be adversely affected by large swings in investment, and must therefore develop tools to control credit flows or risk relinquishing any independent monetary policy.

That was the finding of a paper presented at the Kansas City Federal Reserve's monetary policy symposium at Jackson Hole, which highlighted the global impact of the unconventional monetary policy of the United States and other major central banks.

Many countries including India and Brazil have recently suffered steep sell-offs in their currencies, linked in part to the prospect that the Fed might soon dial down the pace of its bond-buying monetary stimulus.

The Jackson Hole study highlights a shift in conventional economic thinking, which used to champion open flows of money between countries regardless of the consequences.

"Macroprudential policies are necessary to restore monetary policy independence for the non���central countries," wrote Helene Rey, professor at the London Business School.

"They can substitute for capital controls, although if they are not sufficient, capital controls must also be considered."

That is because countries with floating exchange rates, the dominant global practice, would be abdicating their control over interests rates and credit creation from sources outside their control, the paper said.

"Independent monetary policies are possible if and only if the capital account is managed, directly or indirectly via macroprudential policies," Rey said.

(Reporting by Pedro Nicolaci da Costa; Editing by Vicki Allen)