Based on the review on the book Nowhere to Hide, I further researched an instance of carry trade. In the 2007 article from Forbes , one sees the constant balancing act maintained by the New Zealand central bank. It had to manage various goals under influence from local and external factors.
Definitely not an easy task…
For the sake of financial/macroeconomic stability, scholars like Matthew Richardson of NYU Stern School of Business recommended banning carry trades and those activities similar to them for banks altogether. New Zealand in the above example was somehow able to regulate hot money flows into its domestic housing market thereby averting a meltdown. Perhaps this was conceptually similar to how China stayed clear of the Asian Financial Crisis by having Capital ‘A’ and Capital ‘B’ markets where local and external investors were kept apart.
Please also see:
Definition of carry trade and its dangers (accessed 28 July 2014)